The following table shows Ketta's total utility for coffee and croissants.

-Refer to Table 5.16 to answer this question.If Ketta has a budget of $15 and the price of both coffees and croissants are $3,what will be her optimal purchase?
A)5 croissants.
B)1 coffee and 4 croissants.
C)2 coffees and 3 croissants.
D)3 coffees and 2 croissants.
E)4 coffees and 1 croissant.

Question

The following table shows Ketta's total utility for coffee and croissants.
 
-Refer to Table 5.16 to answer this question.If Ketta has a budget of $15 and the price of both coffees and croissants are $3,what will be her optimal purchase?
A)5 croissants. 
B)1 coffee and 4 croissants. 
C)2 coffees and 3 croissants. 
D)3 coffees and 2 croissants. 
E)4 coffees and 1 croissant.

Quizplus · Accepted Answer

With a budget of $15 and a price of $3 for both coffees and croissants, Ketta can purchase 5 items in total. By looking at the table, we can see that Ketta's marginal utility (MU) for coffee decreases as she consumes more, but her MU for croissants remains constant at 8. Therefore, Ketta should purchase more croissants than coffees to maximize her overall utility. 
If Ketta buys 5 coffees, her total utility will only be 29. If she buys 5 croissants, her total utility will be 40. However, if she buys 2 coffees and 3 croissants, her total utility will be the highest at 42, which is the optimal purchase.

The Following Table Shows Ketta's Total Utility for Coffee and Croissants