Joseph chooses a combination of apples and oranges along his budget line.the marginal rate of substitution of apples in place of oranges is 2, the price of an apple is $0.50, and the price of an orange is $0.10.Joseph:
A)is maximizing total utility.
B)should consume more apples and fewer oranges to maximize total utility.
C)should consume fewer apples and more oranges to maximize total utility.
D)may or may not be maximizing total utility.

Question

Quizplus · Accepted Answer

The marginal rate of substitution of apples in place of oranges is 2, which means Joseph is willing to give up 2 oranges for every additional apple. However, apples are more expensive than oranges (5 times more expensive), so Joseph should consume fewer apples and more oranges to maximize total utility based on the law of diminishing marginal utility. This means he should move towards the point where the slope of the budget line is equal to the marginal rate of substitution, which in this case means consuming more oranges and less apples.

Joseph Chooses a Combination of Apples and Oranges Along His