Lin is maximizing total utility while consuming food and clothing.Her marginal utilities of food and clothing are 50 utils and 25 utils,respectively.If clothing is priced at $10 per unit,the price of a unit of food
A)must be rising
B)must be falling
C)must equal $10 as well
D)must equal $20
E)cannot be determined without additional information.

Question

Quizplus · Accepted Answer

To maximize utility, the ratio of marginal utility to price should be equal for all goods. Therefore, 50/P_food = 25/10, solving gives P_food = $20.

Lin Is Maximizing Total Utility While Consuming Food and Clothing