If the marginal utility of food divided by the price of food exceeds the marginal utility of clothing divided by the price of clothing
A) the price of food is too high and less food should be purchased.
B) the total utility received from food exceeds the total utility received from clothing.
C) more should be spent on food and less on clothing.
D) more clothing should be purchased to raise the marginal utility of the last dollar spent.
E) the price of clothing must exceed the price of food.

Question

Quizplus · Accepted Answer

When the marginal utility of food divided by the price of food is greater than the marginal utility of clothing divided by the price of clothing, it means that the consumer is getting more satisfaction per dollar spent on food than on clothing. Therefore, the consumer should spend more on food and less on clothing to maximize overall utility. Choice A is incorrect because the high price of food does not necessarily mean that less food should be purchased. Choice B is incorrect because total utility is not necessarily relevant to this scenario. Choice D is incorrect because the goal is not to raise the marginal utility of the last dollar spent on clothing, but rather to maximize overall utility. Choice E is incorrect because the question does not provide information about the relative prices of food and clothing.

If the Marginal Utility of Food Divided by the Price