For the questions , assume James purchases only two goods, steak and chicken, with his weekly income of $60. The price of steak is $10 and the price of chicken is $5. The following table shows the marginal utility James obtains from each additional pound of steak and chicken:

$$\begin{array} { l ccc}
\text { Quantity } & \begin{array} { l }
\text { Marginal utility of } \
\text { steak }
\end{array} & \begin{array} { c }
\text { Marginal utility of } \
\text { chicken }
\end{array} & \
\hline 1 & 70 & 50 \
2 & 60 & 40 & \
3 & 50 & 30 & \
4 & 40 & 20 & \
5 & 32 & 10 &
\end{array}$$
-If the price of steak falls to $8, what quantities of steak and chicken should James purchase to maximize his utility?
A) 6 steak, 2 chicken
B) 5 steak, 3 chicken
C) 4 steak, 4 chicken
D) 5 steak, 4 chicken
E) 3 steak, 6 chicken

Question

For the questions  , assume James purchases only two goods, steak and chicken, with his weekly income of $60. The price of steak is $10 and the price of chicken is $5. The following table shows the marginal utility James obtains from each additional pound of steak and chicken:

$$\begin{array} { l ccc} 
\text { Quantity } & \begin{array} { l } 
\text { Marginal utility of } \
\text { steak }
\end{array} & \begin{array} { c } 
\text { Marginal utility of } \
\text { chicken }
\end{array} &  \
\hline 1 & 70 & 50 \
2 & 60 & 40 & \
 3 & 50 & 30 & \
4 & 40 & 20 & \
5 & 32 & 10 &
\end{array}$$
-If the price of steak falls to $8, what quantities of steak and chicken should James purchase to maximize his utility?
A) 6 steak, 2 chicken
B) 5 steak, 3 chicken
C) 4 steak, 4 chicken
D) 5 steak, 4 chicken
E) 3 steak, 6 chicken

Quizplus · Accepted Answer

When the price of steak falls to $8, the marginal utility per dollar spent on steak increases. This means that James should purchase more steak and less chicken to maximize his utility. The correct answer is D) 5 steak, 4 chicken.

For the Questions , Assume James Purchases Only Two