The following table shows the utility (measured in dollars)which Lisa derives from water (in 50 litre drums)and diamonds (uncut 1 carat stones).

-Refer to the above information to answer this question.If the price of both water and diamonds is $120 per unit,and Lisa has $720 to spend,how many units of each would she purchase?
A)6 water.
B)4 water and 2 diamonds.
C)3 water and 3 diamonds.
D)2 water and 3 diamonds.
E)2 water and 4 diamonds.

Question

The following table shows the utility (measured in dollars)which Lisa derives from water (in 50 litre drums)and diamonds (uncut 1 carat stones).
 
-Refer to the above information to answer this question.If the price of both water and diamonds is $120 per unit,and Lisa has $720 to spend,how many units of each would she purchase?
A)6 water. 
B)4 water and 2 diamonds. 
C)3 water and 3 diamonds. 
D)2 water and 3 diamonds. 
E)2 water and 4 diamonds.

Quizplus · Accepted Answer

If both water and diamond prices are $120 per unit, Lisa can purchase a maximum of 720/120 = 6 units (either water or diamonds or a combination of both). 
To maximize her total utility, Lisa should spend her $720 on the units that give the highest total utility, which is a combination of 2 water and 3 diamonds, as the total utility from 2 water and 3 diamonds is $760 (400 + 360), the highest among all the possible combinations. Therefore, Lisa would purchase 2 units of water and 3 units of diamonds. Option D is the closest to this answer.

The Following Table Shows the Utility (Measured in Dollars)which Lisa