If Fred's marginal utility of pizza equals 10 and his marginal utility of salad equals 2,then
A) he would give up 5 pizzas to get the next salad.
B) he would give up 5 salads to get the next pizza.
C) he will eat five times as much pizza as salad.
D) he will eat five times as much salad as pizza.

Question

Quizplus · Accepted Answer

To determine the best choice, we use the principle of equimarginal utility which states that a consumer will maximize satisfaction when the last dollar spent on each product yields the same marginal utility. In this case, Fred should give up pizzas for salad until the marginal utility of each product is equal. Since his marginal utility for pizza is higher (10) than salad (2), he should give up more pizzas to get the next salad. Therefore, he should give up 5 salads to get the next pizza, making choice B the best answer.

If Fred's Marginal Utility of Pizza Equals 10 and His