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Suppose That Dianne Lindsay Spends All Her Income on Two

Question 73

Multiple Choice

Suppose that Dianne Lindsay spends all her income on two goods, A and B, in a manner in which the marginal utility to price ratios are not equal, MUa/Pa is greater thanMUb/Pb. If at that time the price of A is higher than the price of B, then she


A) is already maximizing her total utility and should make no change
B) should increase her purchases of B and decrease her purchases of A because the price of A is higher
C) should increase her purchases of B and decrease her purchases of A because the marginal utility of A is higher
D) should lower the price of good A relative to good B
E) should increase her purchases of A and decrease her purchases of B

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