Question

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
attend Eastern State​ University, if MUE/PE EXCEEDS MUW/PW

attend Eastern State University if MUE/PE is less than MUW/PW

attend Western State​ University, if PE/MUE< PW/MUW

attend Western State​ University, since it gives him more utility.

Answer 1

Answer:

attend Eastern State​ University, if MUE/PE EXCEEDS MUW/PW

Explanation:

A rational individual will always choose the alternative that provides the highest marginal utility per dollar invested.

If MUE and MUW represent the marginal utilities, and PR and PW represent the prices, Ryan should attend the university that provides the highest utility per dollar, i.e. the highest MU and the lowest P.

He should attend Eastern State University if the MUE/PE (marginal utility per dollar of Eastern State University) is higher than MUW/PW (marginal utility per dollar of Western State University).