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Suppose That Tracy Stuart Spends All of Her Income on Two

Question 76

Multiple Choice

Suppose that Tracy Stuart spends all of her income on two goods, A and B, in a manner in which MUa = 15 and MUb = 80, and the Pa = $5 and the Pb = $20. 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
C) should raise MUa so that the MUa/Pa ratio is higher, giving her reason to buy more of A and less of B
D) should raise MUa so that the MUa/Pa ratio is higher, giving her reason to buy more of B and less of A
E) should increase her purchases of A and decrease her purchases of B

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