Sarah can consume either pizzas or hamburgers. The price of a hamburger is $1 and the price of a pizza is $5. Let MUh be the marginal utility of hamburgers and MUp be the marginal utility of pizzas. In consumer equilibrium, what must the ratio MUh/MUp equal?
A)1/5
B)5/1
C)1/1
D)1/6
E)4

Question

Quizplus · Accepted Answer

In consumer equilibrium, the ratio of the marginal utility to price should be equal for all goods. Therefore, MUh/1 = MUp/5, which simplifies to MUh/MUp = 1/5.

Sarah Can Consume Either Pizzas or Hamburgers