Table 6.6 Table 6.6 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods.The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 6.6.If Jay can eat all the burgers he wants for free, he will consume
A)7 burgers
B)6 burgers
C)5 burgers
D)3 burgers

Question

Table 6.6  Table 6.6 lists Jay's marginal utilities for burgers and Pepsi.Jay has $7 to spend on these two goods.The price of a burger is $2 and the price of a can of Pepsi is $1.
-Refer to Table 6.6.If Jay can eat all the burgers he wants for free, he will consume
A)7 burgers 
B)6 burgers 
C)5 burgers 
D)3 burgers

Quizplus · Accepted Answer

If Jay can eat all the burgers he wants for free, he should allocate all $7 towards purchasing cans of Pepsi. This is because his marginal utility for Pepsi exceeds the marginal utility for burgers, and the marginal utility per dollar spent is higher for Pepsi than it is for burgers. Therefore, he should purchase 7 cans of Pepsi and consume 5 burgers for free, resulting in a total utility of 26.

Table 66 Table 6