Suppose Suzanne allocates her spending on apples and bananas according to the rational spending rule. If the price of apples is less than the price of bananas, then at Suzanne's optimal consumption bundle, her marginal utility from apples will be:
A)less than her marginal utility from bananas.
B)greater than her marginal utility from bananas.
C)equal to her marginal utility from bananas.
D)equal to zero.

Question

Quizplus · Accepted Answer

According to the rational spending rule, consumers should allocate their spending such that the marginal utility per dollar spent on each item is the same for all items. Therefore, at a consumer's optimal consumption bundle, the lower the price of an item, the lower must be the consumer's marginal utility from consuming that item.

Suppose Suzanne Allocates Her Spending on Apples and Bananas According