Samir consumes apples and bananas and is in consumer equilibrium.The marginal utility from his last apple is 10 and the marginal utility from his last banana is 5.If the price of an apple is $0.50,then what is the price of a banana?
A)$0.05
B)$0.10
C)$0.25
D)$0.50
E)$1.00

Question

Quizplus · Accepted Answer

In consumer equilibrium, the ratio of the marginal utilities of two goods equals the ratio of their prices. Therefore, $ \frac{MU_{apple}}{MU_{banana}} = \frac{Price_{apple}}{Price_{banana}} $. Given $ MU_{apple} = 10 $, $ MU_{banana} = 5 $, and $ Price_{apple} = $0.50 $, we can solve for $ Price_{banana} $ as follows: $ \frac{10}{5} = \frac{0.50}{Price_{banana}} $, which simplifies to $ Price_{banana} = $0.25 $.

Samir Consumes Apples and Bananas and Is in Consumer Equilibrium