If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc = 400/?, the prices of products B and C in consumer equilibrium
A)cannot be determined from the information given.
B)are $105 and $140, respectively.
C)are $105 and $175, respectively.
D)are $100 and $200, respectively.

Question

Quizplus · Accepted Answer

To find the prices of products B and C, set the marginal utility per dollar equal for all products: MUa/Pa = MUb/Pb = MUc/Pc. Given MUa/Pa = 100/35, we solve for Pb and Pc:  100/35 = 300/Pb => Pb = 105  100/35 = 400/Pc => Pc = 140