Adriana is maximizing her utility. Her MU_x/P_x = 10 and MU_y = 60. Then the price of Y must be A) $1. B) $6. C) $10. D) $60.

Question

Quizplus · Accepted Answer

The ratio of the marginal utility of good Y to its price (MUy/Py) should equal the ratio of the marginal utility of good X to its price (MUx/Px) for a consumer to maximize utility. Given MUx/Px = 10 and MUy = 60, for these ratios to be equal, Py must be 6 times greater than Px if Px is assumed to be 1. Thus, the price of Y must be $6.

Adriana Is Maximizing Her Utility