If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should
A) decrease his spending on cola.
B) decrease his spending on cola and increase his spending on shirts.
C) increase his spending on shirts.
D) increase his spending on cola and decrease his spending on shirts.

Question

Quizplus · Accepted Answer

Since Mr. Smith believes that the last dollar spent on shirts gives him more satisfaction than the last dollar spent on cola, he should shift his spending towards shirts and away from cola in order to maximize his overall utility. This means decreasing his spending on cola and increasing his spending on shirts, as choice B suggests.

If Mr Smith Thinks the Last Dollar Spent on Shirts Yields