The table below shows the quantities of toffee bars and bags of cashews that a consumer could consume over a 1- week period. $\begin{array}{|c|c|c|c|c|}
&\text { Toffee (bars)}&&\text { Cashews (bags) }\
\hline \text { Units } & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Utility }
\end{array} & \begin{array}{c}
\text { Total } \
\text { Utility }
\end{array} \
\hline 1 & 10 & 10 & 12 & 12 \
\hline 2 & 8 & 18 & 10 & 22 \
\hline 3 & 5 & 23 & 7 & 29 \
\hline 4 & 3 & 26 & 5 & 34 \
\hline 5 & 1 & 27 & 2 & 36 \
\hline 6 & 0 & 27 & 1 & 37 \
\hline 7 & 0 & 27 & 0 & 27 \
\hline
\end{array}$ TABLE 6- 1
-Refer to Table 6- 1.If the price of toffee bars is $1 each,bags of cashews are $2 each,and this consumer has $7 per week to spend on these two snacks,how many of each will he/she purchase to maximize utility?
A)3 toffee bars and 2 bags of cashews
B)0 toffee bars and 3 bags of cashews
C)7 toffee bars and 0 bags of cashews
D)1 toffee bars and 3 bags of cashews
E)2 toffee bars and 2 bags of cashews

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should allocate their budget such that the marginal utility per dollar spent is equal for both goods. For toffee bars, the marginal utility per dollar is highest for the first 3 bars (10, 8, 5), and for cashews, it's highest for the first 2 bags (12, 10). With $7, buying 3 toffee bars ($3) and 2 bags of cashews ($4) maximizes utility.

The Table Below Shows the Quantities of Toffee Bars and Bags