Ryan is deciding between attending Western State University and Eastern State University. He cannot attend both universities simultaneously. Both are fine universities, but the reputation of Western is slightly higher, as is the tuition. Let MUE and MUW be Ryan's marginal utilities from attending Eastern and Western State Universities respectively and PE and PW be the prices of attending Eastern and Western State Universities. Using the rule of consumer optimum, Ryan will decide to
Part 2
A.
attend Western State University, since it gives him more utility.
B.
attend Western State University, if PE/ MU E less than PW / MUW
.
C.
attend Eastern State University, if MU E/PE is less than MUW/PW
.
D.
attend Eastern State University, if MUE/PE exceeds MUW/PW
.
C. attend Eastern State University, if MU E/PE is less than MUW/PW.
To determine Ryan's decision using the rule of consumer optimum, we need to compare the ratio of marginal utility to price for each university option.
Let's take a look at the options:
A. Attend Western State University, since it gives him more utility.
This option doesn't consider the prices. While attending Western State University may provide Ryan with more utility, it's important to factor in the prices as well. So this option is not sufficient.
B. Attend Western State University if PE/MUE is less than PW/MUW.
This option compares the ratios of price to marginal utility for each university. The logic behind this is that Ryan should attend Western State University if the price per unit of marginal utility (PE/MUE) for attending Eastern State University is higher than the price per unit of marginal utility (PW/MUW) for attending Western State University. If this condition is met, Ryan will choose Western. This option considers both utility and price and the comparison between the two.
C. Attend Eastern State University if MUE/PE is less than MUW/PW.
This option compares the ratios of marginal utility to price for each university. The reasoning here is that Ryan should attend Eastern State University if the marginal utility per unit of price (MUE/PE) for attending Eastern State University is lower than the marginal utility per unit of price (MUW/PW) for attending Western State University. If this condition is met, Ryan will choose Eastern. Again, this option incorporates both utility and price.
D. Attend Eastern State University if MUE/PE exceeds MUW/PW.
This option contradicts the previous option. It suggests that Ryan should attend Eastern State University if the marginal utility per unit of price (MUE/PE) for attending Eastern State University is higher than the marginal utility per unit of price (MUW/PW) for attending Western State University. This contradicts the logic of the rule of consumer optimum, so this option is not correct.
Based on the options presented, it seems like option B is most aligned with the rule of consumer optimum. As a result, Ryan will decide to attend Western State University if the price per unit of marginal utility for attending Eastern State University (PE/MUE) is less than the price per unit of marginal utility for attending Western State University (PW/MUW).
The correct answer is C.
According to the rule of consumer optimum, Ryan will decide to attend Eastern State University if MU E/PE is less than MUW/PW. This rule states that a consumer will maximize their utility by allocating their spending in a way that the marginal utility per dollar spent is equal across all goods or services.
In this scenario, MU E represents the marginal utility Ryan will gain from attending Eastern State University, and PE represents the price he will have to pay for attending Eastern State University. Similarly, MUW represents the marginal utility Ryan will gain from attending Western State University, and PW represents the price he will have to pay for attending Western State University.
If MU E/PE is less than MUW/PW, it means that the marginal utility per dollar spent is higher for attending Eastern State University compared to Western State University. Therefore, Ryan will decide to attend Eastern State University.