Asked by
Bogumila Polska
on Dec 05, 2024
Verified
Sally devotes all of her income to the consumption of apples and Reese's Peanut Butter Cups.At her current level of consumption,the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8.Assume that diminishing marginal utility applies to both apples and Reese's Peanut Butter Cups.Suppose the price of an apple is $0.20 and the price of a Reese's Peanut Butter Cup is $0.25.To maximize her total utility,assuming that the goods are divisible,she would:
A) consume more Reese's Peanut Butter Cups and fewer apples.
B) consume less of both goods.
C) consume more apples and fewer Reese's Peanut Butter Cups.
D) There is not enough information to justify a change in her current level of consumption.
Diminishing Marginal Utility
The principle that as a person consumes more of a good, the satisfaction gained from each additional unit decreases.
Apples
A type of fruit known for its sweet taste and crisp texture, coming in various colors such as red, green, and yellow.
- Familiarize oneself with the techniques consumers employ to maximize utility in light of their financial limitations.
- Absorb the concept that marginal utility per dollar spent should be equal to maximize utility effectively.
- Identify the impact of price changes on the consumption of goods and understand substitution effects.
Verified Answer
JT
Learning Objectives
- Familiarize oneself with the techniques consumers employ to maximize utility in light of their financial limitations.
- Absorb the concept that marginal utility per dollar spent should be equal to maximize utility effectively.
- Identify the impact of price changes on the consumption of goods and understand substitution effects.
Related questions
Smedley,a Careful Utility Maximizer,consumes Peanut Butter and Broccoli ...
Juan Spends All of His Income on Packs of Baseball ...
Assume That Diminishing Marginal Utility Applies to Both Ballet Slippers ...
Diego Spends All of His Income on Milkshakes and French ...
Assume That Diminishing Marginal Utility Applies to Both Textbooks and ...