Suppose that at Miles's current level of consumption, his marginal utility from a pizza is 10 utils, and his marginal utility from a pint of ice cream is 16 utils. If the price of a pizza is $8, and the price of a pint of ice cream is $5, is Miles maximizing his utility?
A)No. He should shift his spending away from ice cream and towards frozen pizza.
B)No. He should buy less frozen pizza and less ice cream.
C)No. He should shift his spending away from frozen pizza and towards ice cream.
D)Yes. He should not change his spending on frozen pizza and ice cream.

Question

Quizplus · Accepted Answer

Miles's marginal utility per dollar spent on pizza (10/8)is less than his marginal utility per dollar spent on ice cream (16/5). Thus, according to the rational spending rule, he should reallocate his spending away from pizza and towards ice cream.

Suppose That at Miles's Current Level of Consumption, His Marginal