Exhibit 6-3 Marginal utility data for goods X and Y $$\begin{array} { | c | c | c | c | }
\hline \text { Units of good X } & \begin{array} { c }
\text { Marginal utility of } \
\text { good X }
\end{array} & \text { Units of good Y } & \begin{array} { c }
\text { Marginal utility of } \
\operatorname { good~Y }
\end{array} \
\hline 1 & 20 & 1 & 14 \
2 & 16 & 2 & 12 \
3 & 12 & 3 & 10 \
4 & 8 & 4 & 8 \
5 & 4 & 5 & 6 \
\hline
\end{array}$$
-As shown in Exhibit 6-3, assume that the price of both goods is $1 per total unit, and your budget is $8. If you consume 4 units of good X and 1 unit of good Y. To maximize utility, you should consume:
A) neither X nor Y.
B) more of X and less of Y.
C) less of X and more of Y.
D) more of both X and Y.
E) less of both X and Y.

Question

Exhibit 6-3 Marginal utility data for goods X and Y $$\begin{array} { | c | c | c | c | } 
\hline \text { Units of good X } & \begin{array} { c } 
\text { Marginal utility of } \
\text { good X }
\end{array} & \text { Units of good Y } & \begin{array} { c } 
\text { Marginal utility of } \
\operatorname { good~Y }
\end{array} \
\hline 1 & 20 & 1 & 14 \
2 & 16 & 2 & 12 \
3 & 12 & 3 & 10 \
4 & 8 & 4 & 8 \
5 & 4 & 5 & 6 \
\hline
\end{array}$$
-As shown in Exhibit 6-3, assume that the price of both goods is $1 per total unit, and your budget is $8. If you consume 4 units of good X and 1 unit of good Y. To maximize utility, you should consume:
A) neither X nor Y.
B) more of X and less of Y.
C) less of X and more of Y.
D) more of both X and Y.
E) less of both X and Y.

Quizplus · Accepted Answer

To maximize utility, the marginal utility per dollar spent should be equal for both goods. Currently, MU per dollar for X is 8 and for Y is 14, so you should consume less of X and more of Y.

Exhibit 6-3 Marginal Utility Data for Goods X and Y