Marv Pilson has $50 worth of groceries in a shopping cart at his local Shop 'n Save.Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50.The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20.Marv has only $50 to spend, but has not yet paid for his groceries.How can Marv increase his total utility without spending more than $50?
A)Marv should substitute his favorite soft drink or the cereal in his cart for generic brands that have lower prices.
B)Marv should buy more boxes of cereal and fewer bottles of soft drink.
C)Marv should buy fewer boxes of cereal and more bottles of soft drink.
D)Marv should buy fewer boxes of cereal and fewer bottles of soft drink. He can then spend more on other items.

Question

Quizplus · Accepted Answer

Marv can increase his total utility by reallocating his spending towards the good with the higher marginal utility per dollar. Since the soft drink has a higher marginal utility per dollar (50) compared to the cereal (20), he should buy more soft drinks and fewer boxes of cereal.

Marv Pilson Has $50 Worth of Groceries in a Shopping