Joe consumes pizza and movies. He is currently spending his entire income and his marginal utility of pizza is 10 and his marginal utility of movies is 5. If the price of a pizza is $10 and the price of a movie is $5, then to maximize his utility Joe should
A) increase consumption of pizza and decrease consumption of movies.
B) increase consumption of movies and decrease consumption of pizza.
C) not change his current bundle of movies and pizza.
D) increase consumption of both goods.

Question

Quizplus · Accepted Answer

Joe is maximizing his utility because the ratio of marginal utility to price is equal for both goods: (10/10) for pizza and (5/5) for movies.

Joe Consumes Pizza and Movies