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 40 MU for apples, 45 MU for pears, and 50 MU for grapes. If Clarissa wants to maximize utility out of her limited budget for fruit, she should buy
A) the same mix of apples, pears, and grapes.
B) more apples and fewer grapes.
C) more pears and fewer apples.
D) more grapes and fewer pears.

Question

Quizplus · Accepted Answer

To maximize utility, Clarissa should aim for the highest marginal utility per dollar spent. The marginal utility per dollar for each fruit is calculated as MU/Price: apples = 40/1.5 = 26.67, pears = 45/2 = 22.5, and grapes = 50/2.5 = 20. Therefore, she should buy more apples and fewer grapes, as apples offer the highest marginal utility per dollar spent.

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