If Alice's marginal utility per dollar spent is higher on magazines than on baseball tickets and she has spent all of her income, then which of the following is true?
A) She should buy more magazines and fewer baseball tickets.
B) She must not be spending all of her budget.
C) Her total utility is as high as possible.
D) She is getting the highest utility from baseball tickets and magazines, given her budget.

Question

Quizplus · Accepted Answer

Alice should buy more magazines and fewer baseball tickets because the marginal utility per dollar spent on magazines is higher than that on baseball tickets, indicating she can increase her total utility by reallocating her spending in favor of magazines.

If Alice's Marginal Utility Per Dollar Spent Is Higher on Magazines