Suppose you are consuming hot dogs and Cokes and believe you are receiving maximum total utility from the meal for your entire budget of $12.The price of a hot dog is $2 and the price of a Coke is $2.Which one of the following can you conclude?
A)The total utility from hot dogs is maximized.
B)The marginal utilities from hot dogs and Cokes divided by the quantity of each good must be equal.
C)The total utilities from hot dogs and Cokes must be equal.
D)You are purchasing three hot dogs and three Cokes.
E)The marginal utilities from hot dogs and Cokes must be equal.

Question

Quizplus · Accepted Answer

The principle of utility maximization states that for a consumer to achieve maximum total utility given a budget constraint, the marginal utility per dollar spent on each good must be equal. Since the prices of hot dogs and Cokes are the same, this implies that their marginal utilities must be equal to maximize total utility.

Suppose You Are Consuming Hot Dogs and Cokes and Believe