Suppose you have a monthly entertainment budget that you use to rent movies and purchase CDs. You currently use your income to rent 5 movies per month at a cost of $5.00 per movie and to purchase 5 CDs per month at a cost of $10.00 per CD. Your marginal utilityLOADING... from the fifth movie is 4040 and your marginal utility from the fifth CD is 9090. Are you maximizing utility? You are A. not maximizing utility because the marginal utility per dollar spent on movies is not equal to the marginal utility per dollar spent on CDs. B. not maximizing utility because the marginal utility of movies is not equal to the marginal utility of CDs. C. maximizing utility because you are spending all of your entertainment budget. D. maximizing utility because you are consuming an equal number of movies and CDs. E. not maximizing utility because the price of movies is not equal to the price of CDs

The marginal utility per dollar that has been spent on the renting of movies is not the same or equal to the one per dollar that has been spent on CDs, the utility is not being maximized. The concept is simple when making a purchase decision, a person's objectives is to get the greatest value possible.

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