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Author Question: Explain why equalizing the marginal utility per dollar for all goods maximizes utility. What will ... (Read 134 times)

FButt

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on: Jun 29, 2018
Explain why equalizing the marginal utility per dollar for all goods maximizes utility.
 
  What will be an ideal response?

Question 2

The idea that because of scarcity, producing more of one good or service means producing less of another good or service refers to the economic concept of
 
  A) trade-off. B) equity. C) efficiency. D) optimization.
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AISCAMPING

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Equating the ratio of marginal utility per dollar for each good and service consumed maximizes utility because it measures the utility gained when an additional dollar of a good or service is consumed. This allows the consumer to weigh the utility gained from additional consumption of a dollar's worth of one good against the utility lost from the forgone consumption of a dollar's worth of another good. When the marginal utility per dollar for each good and service is equalized, there is no additional utility available from any other consumption combination.

Answer to Question 2

A


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