Question

Suppose the marginal utility of a video game is 50 utils and the marginal utility of an iTunes song is 2 utils. The price of a video game is ​$10 and the price of a song is ​$2. The opportunity cost of a video game is ___ songs and the marginal cost of a video game is ___ utils. The marginal benefit of a video game is ___ utils? (Enter your responses as whole​ numbers.)

Answer 1

Opportunity cost is loss of other alternatives when one alternative is chosen. Thus, opportunity cost of video game is 5 songs because consumer can buy 5 songs from $10 which can be used to buy 1 video game.

Marginal cost is the additional cost per unit. Marginal cost of video game is 10 utils because consumers could buy 5 iTunes in exchange of video game where 1 video game give utility of 5 utils.

Marginal benefit is the benefit from consuming additional unit. It is 50 utils.