Frank is purchasing products C and D in utility-maximizing amounts. If the price of C is $6 and the price of D is $3, then
A)the marginal utility of D is twice that of C.
B)the marginal utility of D is the same as that of C.
C)the marginal utility of C is twice that of D.
D)the relationship between the marginal utility of C and D cannot be determined.

Question

Quizplus · Accepted Answer

The marginal utility per dollar spent on each good must be equal for a consumer to maximize utility. Since the price of C is twice that of D, the marginal utility of C must also be twice that of D to equalize the marginal utility per dollar spent on both goods.

Frank Is Purchasing Products C and D in Utility-Maximizing Amounts