Total utility is maximized in the consumption of two goods by
A)equating the marginal utility for each good consumed.
B)equating the marginal utility per dollar for each good consumed.
C)equating the total utility of each good divided by its price.
D)maximizing expenditure on each good.

Question

Quizplus · Accepted Answer

The principle of equating marginal utility per dollar spent states that to maximize total utility, consumers should allocate their spending so that the marginal utility per dollar of the last unit of each good purchased is equal. This ensures that every dollar spent contributes equally to the total utility derived from both goods. By doing so, the consumer maximizes their overall satisfaction and obtains the highest level of total utility from the available budget.

Total Utility Is Maximized in the Consumption of Two Goods