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:

Reallocate spending from magazines to newspapers.
Reallocate spending from newspapers to magazines.
Be satisfied because he is already maximizing his total utility.
None of the above.

The correct option is Reallocate spending from magazines to newspapers.

Since Frank obtains 10 utils from purchasing each magazine and each newspaper:

So,  

magazine = $5 ÷ 10 utils = $0.50 per util

newspaper = $2.50 ÷ 10 utils = $0.25 per util

As we can see that  Frank obtains twice the utils from each dollar spent on newspapers as compared to the magazines, so he should spend more money on newspapers.

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its kinda hard to answer this when we dont have all the information that we need.

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi