Anderson, a City Employee, Collected Garbage Along Smyth's Street on Thursday

question 11

True/False

Anderson, a city employee, collected garbage along Smyth's street on Thursday of each week. One day Smyth said to Anderson: "You have done such a good job; I will give you $10 when you come by next week." The next week, when Anderson made his regular garbage pickup for the city, he met Smyth and asked for the $10. Smyth refused to pay. Smyth is not obliged to pay Anderson the $10, because his promise was gratuitous.

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Definitions:

Optimal Consumption Rule

A guideline suggesting that to maximize utility, consumers should allocate their budget in a way that the last dollar spent on each good or service yields the same level of marginal utility.

Marginal Utility

The extra gratification or advantage a person receives by consuming an additional unit of a specific good or service.

Marginal Utilities

The extra pleasure or benefit a consumer gets from purchasing and using an additional unit of a product or service.

Utility-Maximizing

A principle in economics where consumers aim to achieve the highest level of satisfaction with their choices, subject to their income and the prices of goods and services.