Question

A consumer has two basic choices: rent a DVD movie for $4.00 and spend 2 hours watching it, or spend $13 for a miniature golf game that takes 1 hour. If the marginal utilities of the movie and the miniature golf game are equal, and the consumer values time at $12 an hour, the rational consumer will most likely

Answer 1

Answer:

Play miniature golf instead of renting the movie.

Explanation: Marginal utility is the added satisfaction derived from spending an extra unit of money.

Now we can see that the consumer values time at $12 per hour, and they'll spend a total of $24 on watching the DVD because this will take 2 hours, the consumer will also spend just $12 on miniature golf because this takes just one hour.

Now factoring the costs of the DVD and the miniature golf into the equation, we have:

Total cost of renting and watching the DVD:

$4 + $24 = $28

Total cost of playing miniature golf:

$13 + $12 = $25

We can see that the consumer will spend less in playing miniature, while getting the same marginal utility with the other option.