-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 and the price of a DVD is $10 and Lisa has $60 to spend on the two goods, what combination of pizza and DVDs will maximize her utility?
A) 2 DVDs and 4 pizzas
B) 3 DVDs and 5 pizzas
C) 4 DVDs and 2 pizzas
D) 3 DVDs and 3 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 and the price of a DVD is $10 and Lisa has $60 to spend on the two goods, what combination of pizza and DVDs will maximize her utility?
A) 2 DVDs and 4 pizzas 
B) 3 DVDs and 5 pizzas 
C) 4 DVDs and 2 pizzas 
D) 3 DVDs and 3 pizzas

Quizplus · Accepted Answer

Lisa has $60 to spend and the price of a pizza is $10 and the price of a DVD is $10. So, she can buy either 6 pizzas or 6 DVDs. The table shows that the marginal utility of the first pizza is 10, the marginal utility of the second pizza is 8, the marginal utility of the third pizza is 6, the marginal utility of the fourth pizza is 4, the marginal utility of the fifth pizza is 2, and the marginal utility of the sixth pizza is 0. The marginal utility of the first DVD is 12, the marginal utility of the second DVD is 10, the marginal utility of the third DVD is 8, the marginal utility of the fourth DVD is 6, the marginal utility of the fifth DVD is 4, and the marginal utility of the sixth DVD is 2. So, Lisa will get the most utility from buying 4 pizzas and 2 DVDs.

-Lisa Spends All Her Income on Pizzas and DVDs