Question

After viewing the video clip from Cool Hand Luke, first consider how marginal benefits and marginal costs fit in to Luke’s decision, and how the concept of diminishing marginal utility is at work as Luke eats more and more eggs.

What is driving his marginal benefits to continue to exceed his marginal cost?

Consider how Luke’s decision would change if he had to actually pay for each egg he eats. How would this affect his choice to continue eating?

Consider the concept of marginal utility per dollar spent (i.e. MU/p) and how it affects the consumption decisions we make. Have you ever had a time where you actually bought your second choice rather than your first choice? That is, can you think of a time where it wasn't only about marginal utility for you, but about marginal utility per dollar spent? Explain.

Answer 1