Assume that diminishing marginal utility applies to both slippers and tutus and that Natasha is spending all of her income. If Natasha purchases a combination of ballet slippers and tutus such that MU_Slippers / P_Slippers = 20 and MU_Tutus / P_Tutus = 5, to maximize utility, Natasha should buy _____ slippers and _____ tutus. A) more; fewer B) fewer; more C) more; more D) fewer; fewer

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Quizplus · Accepted Answer

To maximize utility, Natasha should equalize the marginal utility per dollar spent on each good. Since MU_Slippers / P_Slippers is greater than MU_Tutus / P_Tutus, she should buy more slippers and fewer tutus.

Assume That Diminishing Marginal Utility Applies to Both Slippers and Tutus