-Lisa spends all her income on pizzas and DVDs. The above table shows Lisa's marginal utility for pizza and marginal utility for DVDs. If the price of a pizza is $10, the price of a DVD is $5, and Lisa has $40 to spend on the two goods, what combination of pizza and DVDs will maximize her utility?
A) 6 DVDs and 1 pizza
B) 4 DVDs and 2 pizzas
C) 2 DVDs and 3 pizzas
D) 5 DVDs and 4 pizzas

Question

-Lisa spends all her income on pizzas and DVDs. The above table shows Lisa's marginal utility for pizza and marginal utility for DVDs. If the price of a pizza is $10, the price of a DVD is $5, and Lisa has $40 to spend on the two goods, what combination of pizza and DVDs will maximize her utility?
A) 6 DVDs and 1 pizza 
B) 4 DVDs and 2 pizzas 
C) 2 DVDs and 3 pizzas 
D) 5 DVDs and 4 pizzas

Quizplus · Accepted Answer

To maximize utility, Lisa should equalize the marginal utility per dollar spent on each good. The combination of 4 DVDs and 2 pizzas allows her to do this within her budget.

-Lisa Spends All Her Income on Pizzas and DVDs