At her current consumption level,Betty gets twice as much marginal utility from an additional bottle of soda as she does from an additional bottle of water.If she is maximizing her utility and the price of soda is $2 per bottle,then the price of a bottle of water must be
A) $1.00.
B) $2.00.
C) $4.00.
D) $8.00.

Question

Quizplus · Accepted Answer

If Betty is maximizing her utility, she will continue to consume both soda and water until the marginal utility per dollar spent on both goods is equal. If she gets twice as much marginal utility from an additional bottle of soda as she does from an additional bottle of water, then the marginal utility per dollar spent on soda is twice that of water. Therefore, if soda costs $2 per bottle, the price of water must be $1 per bottle to make the marginal utility per dollar spent on both goods equal. Therefore, the best choice is A) $1.00.

At Her Current Consumption Level,Betty Gets Twice as Much Marginal