Jill, a careful utility maximizer, consumes peanut butter and ice cream. Assume that both peanut butter and ice cream are normal goods. She had just achieved the utility-maximizing solution in her consumption of the two goods when the price of peanut butter increased. As she adjusted to this event, the marginal utility of peanut butter _____ and that of ice cream _____.
A) rose; rose
B) fell; fell
C) fell; rose
D) rose; fell

Question

Quizplus · Accepted Answer

When the price of peanut butter increases, Jill will consume less of it, causing the marginal utility of peanut butter to rise due to the law of diminishing marginal utility. Conversely, she will consume more ice cream, causing its marginal utility to fall.

Jill, a Careful Utility Maximizer, Consumes Peanut Butter and Ice