Use the following to answer questions: Figure: Water vs. Soda
-(Figure: Water vs. Soda) Refer to the figure. The figure represents the marginal utility Janet receives when she consumes bottled water and soda. The prices of bottled water and sodas are both $1 each. Janet has $5 to spend. What mix of bottled water and soda will maximize Janet's utility?
A) five bottles of water
B) four bottles of water and one soda
C) three bottles of water and two sodas
D) 2.5 bottles of water and 2.5 sodas

Question

Use the following to answer questions: Figure: Water vs. Soda 
-(Figure: Water vs. Soda) Refer to the figure. The figure represents the marginal utility Janet receives when she consumes bottled water and soda. The prices of bottled water and sodas are both $1 each. Janet has $5 to spend. What mix of bottled water and soda will maximize Janet's utility?
A) five bottles of water 
B) four bottles of water and one soda 
C) three bottles of water and two sodas 
D) 2.5 bottles of water and 2.5 sodas

Quizplus · Accepted Answer

In order to maximize utility, Janet should consume a combination of bottled water and soda where the marginal utility per dollar spent is equal for both. Looking at the graph, we can see that the marginal utility per dollar spent on bottled water starts to decrease after consuming 3 bottles, while the marginal utility per dollar spent on soda starts to increase after consuming 2 sodas. Therefore, the optimal combination would be to buy 3 bottles of water and 2 sodas, which would cost a total of $5 and give Janet the highest possible utility.

Use the Following to Answer Questions: Figure: Water Vs