Robinson spends all his income on mangos and bananas. Mangos cost $3 per pound and bananas cost $1 per pound. The marginal utility is 30 for the last pound of mangos purchased and 8 for the last pound of bananas. To maximize his utility, Robinson should buy

Question

Quizplus · Accepted Answer

To maximize utility, the marginal utility per dollar spent should be equal for all goods. Currently, the marginal utility per dollar for mangos is 30/3 = 10, and for bananas, it is 8/1 = 8. Robinson should buy more mangos and fewer bananas to equalize the marginal utility per dollar.

Robinson Spends All His Income on Mangos and Bananas