If Ellie Mae spends her income on possum and biscuits and the price of possum is three times the price of biscuits, then when Ellie Mae maximizes total utility, she will buy
A)equal quantities of possum and biscuits
B)three times as much possum as biscuits
C)three times as many biscuits as portions of possum
D)biscuits and possum until the marginal utility of possum is three times the marginal utility of biscuits
E)biscuits and possum until the marginal utility of biscuits is three times the marginal utility of possum

Question

Quizplus · Accepted Answer

When maximizing utility, Ellie Mae will allocate her spending such that the marginal utility per dollar spent on each good is equal. Since the price of possum is three times the price of biscuits, the marginal utility of possum must be three times the marginal utility of biscuits for her to maximize utility.

If Ellie Mae Spends Her Income on Possum and Biscuits