Bobby consumes only chocolate ice cream and vanilla ice cream. He is spending all of his income. His marginal utility of chocolate is 200 and his marginal utility of vanilla is 100, and the price of chocolate is $2.00 per scoop and the price of vanilla is $1.00 per scoop. Bobby has maximized his
A) marginal utility of chocolate ice cream.
B) marginal utility of vanilla ice cream.
C) marginal utilities of chocolate ice cream and vanilla ice cream.
D) total utility.

Question

Quizplus · Accepted Answer

Bobby has maximized his total utility when the ratio of the marginal utility to price is equal for both goods. Here, MUc/Pc = 200/2 = 100 and MUv/Pv = 100/1 = 100, so he has maximized his total utility.

Bobby Consumes Only Chocolate Ice Cream and Vanilla Ice Cream