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The law of diminishing marginal utility predicts the consumption behavior of addicts quite

The law of diminishing marginal utility predicts the consumption behavior of addicts quite

The law of diminishing marginal utility predicts the consumption behavior of addicts quite well.

2.   Frank spends $75 on 10 magazines and 25 newspapers.  The magazines cost $5 each and the newspapers cost $2.50 each.  Suppose that his MU from the final magazine is 10 utils while his MU from the final newspaper is also 10 utils.  According to the utility-maximizing rule, Frank should:

a. Reallocate spending from magazines to newspapers.

b. Reallocate spending from newspapers to magazines.

c. Be satisfied because he is already maximizing his total utility.

d. None of the above.

Abhinav 05-Dec-2019

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