If Ty's marginal utility for a cup of coffee is 20 and his marginal utility of a donut is 10, then
A) coffee should be his next purchase.
B) a donut should be his next purchase.
C) they should both be purchased.
D) price information is also needed to determine what Ty should purchase next.

Question

Quizplus · Accepted Answer

To determine what Ty should purchase next, we need to know the prices of the coffee and the donut. Marginal utility alone does not provide enough information to make this decision; we must also consider the marginal utility per dollar spent (marginal utility divided by price) to make an optimal choice.

If Ty's Marginal Utility for a Cup of Coffee Is