Sam spends all of his income on textbooks and hot dogs. The price of a textbook is $40 and the price of a hot dog is $0.50. If Sam is maximizing his utility and the marginal utility he derives from the last textbook he purchases is 400, then the marginal utility he derives from his last hot dog purchased must be

Question

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To maximize utility, the marginal utility per dollar spent should be equal for all goods. For textbooks: MU/Price = 400/40 = 10. For hot dogs: MU/Price = x/0.5. Setting them equal: 10 = x/0.5, solving for x gives x = 5.

Sam Spends All of His Income on Textbooks and Hot