The prices per pound of apples, pears, and grapes are $1.50, $2, and $2.50, respectively. Clara's marginal utils for the last pound bought of each is 30 MU for apples, 35 MU for pears, and 60 MU for grapes. If Clarissa wants to maximize utility out of her limited budget for fruit, she should buy
A) apples, pears, and grapes in the same amounts.
B) more apples and fewer grapes.
C) more pears and fewer grapes.
D) more grapes and fewer pears.

Question

Quizplus · Accepted Answer

To maximize utility, Clara should aim for the highest marginal utility per dollar spent. The marginal utility per dollar for each fruit is calculated as MU/Price: apples = 30/$1.50 = 20 MU per dollar, pears = 35/$2 = 17.5 MU per dollar, and grapes = 60/$2.50 = 24 MU per dollar. Grapes offer the highest marginal utility per dollar, so Clara should buy more grapes and fewer of the fruits with lower marginal utility per dollar, in this case, fewer pears.

The Prices Per Pound of Apples, Pears, and Grapes Are