(Figure: Water vs. Soda) Refer to the figure. The figurerepresents the marginal utility Janet receives when sheconsumes bottled water and soda. The prices of bottled waterand sodas are both $1 each. Janet has $5 to spend. What mix ofbottled water and soda will maximize Janet's utility?
A)five bottles of water
B)four bottles of water and one soda
C)three bottles of water and two sodas
D)2.5 bottles of water and 2.5 sodas

Question

(Figure: Water vs. Soda) Refer to the figure. The figurerepresents the marginal utility Janet receives when sheconsumes bottled water and soda. The prices of bottled waterand sodas are both $1 each. Janet has $5 to spend. What mix ofbottled water and soda will maximize Janet's utility?
A)five bottles of water 
B)four bottles of water and one soda 
C)three bottles of water and two sodas 
D)2.5 bottles of water and 2.5 sodas

Quizplus · Accepted Answer

To maximize Janet's utility, we need to find the point at which the marginal utility per dollar spent on each good is equal. At 3 bottles of water and 2 sodas, the marginal utility per dollar spent on water is 6 and the marginal utility per dollar spent on soda is 4. At all other points, the marginal utility per dollar spent on one good is either higher or lower than the other good's marginal utility per dollar spent. Therefore, the optimal mix for Janet is 3 bottles of water and 2 sodas.

(Figure: Water Vs