Sarah can consume either pizzas or hamburgers.The price of a hamburger is $1 and the price of a pizza is $5.Let MU_h be the marginal utility of hamburgers and MU_p be the marginal utility of pizzas.In consumer equilibrium,what must the ratio MU_h/MU_p equal? A)1/5 B)5/1 C)1/1 D)1/6 E)4

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Quizplus · Accepted Answer

In consumer equilibrium, the ratio of the marginal utilities of two goods (in this case, hamburgers and pizzas) must equal the ratio of their prices. Since the price of a hamburger is $1 and the price of a pizza is $5, the ratio of the marginal utility of hamburgers to the marginal utility of pizzas must equal 1/5.

Sarah Can Consume Either Pizzas or Hamburgers