At his current level of consumption, Cameron gets 3 times more marginal utility from an additional game of pinball than from an additional game of ping pong. If the price of a ping pong game is $0.50, then he is maximizing utility if the price of a pinball game is:
A)$1.00
B)$1.50
C)$2.00
D)$3.00

Question

Quizplus · Accepted Answer

The rational spending rule maintains that consumers should allocate their spending between two goods such that the marginal utility per dollar spent is the same for both goods (that is, MU/P must be the same for both goods). Here, since the marginal utility from an additional game of pinball is three times bigger than the marginal utility from a game of ping pong, Cameron is maximizing his utility of the price of a game of pinball is three times the price of a game of ping pong.

At His Current Level of Consumption, Cameron Gets 3 Times