Bjorn is a student with a monthly budget of $500,which he allocates between transportation services and "all other goods." Suppose the price of transportation is $5 per unit,and the price of "all other goods" is $20 per unit.The marginal utility he currently receives from his consumption of transportation services is 60.What is his marginal utility from the consumption of "all other goods" if he is maximizing his utility?
A)200
B)240
C)5
D)20
E)25

Question

Quizplus · Accepted Answer

The marginal utility of the last dollar spent on transportation is equal to the marginal utility of the last dollar spent on all other goods. So, 5 * marginal utility of transportation = 20 * marginal utility of all other goods. Since the marginal utility of transportation is 60, the marginal utility of all other goods is 60 * 5 / 20 = 150.

Bjorn Is a Student with a Monthly Budget of $500,which