At her current consumption level,Betty gets twice as much marginal utility from an additional bottle of soda as she does from an additional bottle of water.If she is maximizing her utility,and the price of soda is $2 per bottle then the price of a bottle of water must be:
A)$8.00.
B)$1.00.
C)$2.00.
D)$4.00.

Question

Quizplus · Accepted Answer

To maximize utility, the ratio of marginal utility to price should be equal for all goods. Since Betty gets twice the marginal utility from soda compared to water, and the price of soda is $2, the price of water must be $1 to equalize the utility per dollar spent.

At Her Current Consumption Level,Betty Gets Twice as Much Marginal