During a Study Session for an Economics Exam with Three

question 21

Multiple Choice

During a study session for an economics exam with three other students, Peter Daltry commented on an example of a consumer who had to decide on number of slices of pizza and cups of Coca-Cola he would consume.Peter explained that "To maximize his utility this consumer must equate the marginal utility per dollar for pizza and Coca-Cola." Was Peter's analysis correct?

• A)Peter described one of the conditions necessary for utility maximization. The consumer also must equate the marginal utility of pizza and the marginal utility of cups of Coca-Cola.
• B)Peter's statement is correct.
• C)Peter's statement is correct, but we must also assume that the consumer is rational.
• D)Peter describes one of the conditions necessary for utility maximization. The second condition is that total spending on both goods must equal the amount available to be spent.

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Definitions:

Optimal Arousal

A theory suggesting there is a level of arousal that is ideal for facilitating optimal performance on a task or activity.

Incentives

Rewards or stimuli that motivate individuals to perform actions or behaviors, often used to encourage desired outcomes.

Self-actualized

Being self-actualized refers to realizing and fulfilling one's potential and capabilities, as described in Maslow's hierarchy of needs.

Achievement

The act of accomplishing a task or reaching a goal, often requiring skill, effort, or courage.