-Steve has two goods he can spend his income on, skiing and skating, and his marginal utilities from each are in the table above. The price of each unit of skiing is $10 and the price of each unit of skating is $5. Steve has $40 to spend. If Steve consumes the quantities of skiing and skating to maximize his utility, what is his total utility?
A) 40
B) 60
C) 250
D) 300

Question

-Steve has two goods he can spend his income on, skiing and skating, and his marginal utilities from each are in the table above. The price of each unit of skiing is $10 and the price of each unit of skating is $5. Steve has $40 to spend. If Steve consumes the quantities of skiing and skating to maximize his utility, what is his total utility?
A) 40 
B) 60 
C) 250 
D) 300

Quizplus · Accepted Answer

To maximize utility, Steve should allocate his budget such that the marginal utility per dollar spent on skiing equals the marginal utility per dollar spent on skating. By doing this and using his $40 budget, he can achieve a total utility of 250.

-Steve Has Two Goods He Can Spend His Income On