Suppose that each week Henry buys 12 peaches and 3 apples at his local farmer's market. Both kinds of fruit cost $1 each. From this we can infer that:
A)Henry is not maximizing his utility.
B)if Henry is maximizing his utility, then his marginal utility from the 12ᵗʰ peach he buys must be greater than his marginal utility from the 3ʳᵈ apple he buys.
C)if Henry is maximizing his utility, then his marginal utility from the 12ᵗʰ peach he buys must equal his marginal utility from the 3ʳᵈ apple he buys.
D)for Henry the law of diminishing marginal utility does not apply to peaches.

Question

Quizplus · Accepted Answer

According to the rational spending rule, at a consumer's optimal consumption bundle the ratio of marginal utility to price must be the same for all goods. Thus, if peaches and apples both cost $1 each, then Henry is maximizing his utility if his marginal utility from the 12ᵗʰ peach he buys is equal to his marginal utility from the 3ʳᵈ apple he buys.

Suppose That Each Week Henry Buys 12 Peaches and 3