Suppose Paul Has Chosen a Combination of Two Goods, a and B

question 113

Multiple Choice

Suppose Paul has chosen a combination of two goods, A and B, such that the marginal utility per dollar spent for good A (MU_A/P_A) is .6 and the marginal utility per dollar spent for good B (MU_B/P_B) is 1. To increase utility with the same amount of money, Paul should:

• A) increase the number of B consumed and decrease the number of A consumed.
• B) increase the number of A consumed and decrease the number of B consumed.
• C) increase the number of both A and B consumed.
• D) do nothing; he cannot increase total utility.

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Definitions:

Operant Conditioning

A training approach where the potency of an action is changed by means of incentives or disciplining.

Social Learning

The theory that people learn new behaviors, attitudes, and values by observing the actions and outcomes of others' behaviors.

Empathy-Altruism

A theory suggesting that feeling empathy for another person creates a motivational state aimed at enhancing that person's welfare.

Communal Orientation

A frame of mind in which people don’t distinguish between what’s theirs and what is someone else’s.