Suppose that Dianne Lindsay spends all her income on two goods, A and B, in a manner in which their marginal utility to price ratios are equal, i.e., MUa/Pa = MUb/Pb. If at that time the price of A is higher than the price of B, then she
A) should increase her consumption of A and decrease her consumption of B because the marginal utility of A is higher
B) is already maximizing her total utility and should make no change
C) should increase the consumption of B and decrease the consumption of A because the price of B is lower
D) should increase the consumption of both A and B since the ratios are equal
E) has made an irrational choice
Correct Answer:
Verified
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