Alfred derives utility from consuming iced tea and lemonade. For the bundle he currently consumes, the marginal utility he receives from iced tea is 16 utils, and the marginal utility he receives from lemonade is 8 utils. Instead of consuming this bundle, Alfred should:
A) buy more iced tea and less lemonade.
B) buy more lemonade and less iced tea.
C) buy more iced tea and lemonade.
D) buy less iced tea and lemonade.
E) None of the above is necessarily correct.

Question

Quizplus · Accepted Answer

The information provided does not specify the prices of iced tea and lemonade, which are necessary to determine the optimal consumption bundle based on marginal utility per dollar spent. Without knowing the prices, we cannot accurately say which action Alfred should take.

Alfred Derives Utility from Consuming Iced Tea and Lemonade