Jie consumes three heads of broccoli and six bowls of rice each week,using up her weekly budget for these two items.The price of a head of broccoli is $2,and the price of rice is $4 per bowl.Jie's marginal utility from the last head of broccoli consumed is 4 utils,and her marginal utility from her last bowl of rice is 8 utils.If Jie wants to maximize her utility,she should:
A)increase her broccoli consumption and decrease her rice consumption.
B)increase her rice consumption and decrease her broccoli consumption.
C)not change her consumption of either broccoli or rice.
D)stop consuming both goods.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should allocate their budget in a way that the marginal utility per dollar spent on each good is equal. For broccoli, the marginal utility per dollar is 4 utils/$2 = 2 utils per dollar. For rice, it's 8 utils/$4 = 2 utils per dollar. Since these are equal, Jie is already maximizing her utility with her current consumption pattern.

Jie Consumes Three Heads of Broccoli and Six Bowls of Rice