Anne has chosen how many bagels and how many units of cream cheese she would buy this month.She has $20 to spend on these two goods.Suppose that her chosen combination,the marginal benefit per dollar for bagels is $6,and her marginal benefit per dollar for cream cheese is $10.If she decides to buy more bagels and less cream cheese,________.
A) her marginal benefit per dollar for bagels will increase, and her marginal benefit per dollar for cream cheese will decrease
B) her marginal benefit per dollar for bagels will decrease, and her marginal benefit per dollar for cream cheese will increase
C) her marginal benefit per dollar for bagels will increase, and her marginal benefit per dollar for cream cheese will remain the same
D) her marginal benefit per dollar for bagels will decrease, and her marginal benefit per dollar for cream cheese will remain the same

Question

Quizplus · Accepted Answer

According to the principle of diminishing marginal utility, as Anne buys more bagels (and thus consumes less cream cheese), the additional satisfaction (marginal benefit) she gets from each additional bagel will decrease, and the marginal benefit per dollar for bagels will decrease. Conversely, as she buys less cream cheese, the marginal benefit per dollar for the cream cheese she does buy will increase because she is consuming it in smaller quantities, making each unit relatively more valuable to her.

Anne Has Chosen How Many Bagels and How Many Units