Reference: Ref 23-1 (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?

Question

Quizplus · Accepted Answer

To maximize utility, Janet should consume up to the point where the marginal utility per dollar spent is equal for both goods. From the graph, we can see that the marginal utility per dollar spent on the third bottle of water and the second soda is both 8. Therefore, Janet should buy three bottles of water and two sodas to maximize her utility.

Reference: Ref 23-1 (Figure: Water Vs