Terry buys 10 pounds of cheese and 12 boxes of crackers each month.A pound of cheese costs $5 and a box of crackers costs $3.If she is maximizing her utility,what is her monthly income?
A) $86
B) $90
C) $80
D) There is not enough information to determine her monthly income.

Question

Quizplus · Accepted Answer

To maximize utility, Terry should allocate her income between cheese and crackers such that the marginal utility per dollar spent on each product is equal. We don't have any information about the specific marginal utilities or overall utility that Terry derives from cheese and crackers, but we can use the prices and quantities to solve for her monthly income.

10 pounds of cheese at $5 per pound costs Terry $50 per month.
12 boxes of crackers at $3 per box costs Terry $36 per month.

Thus, Terry spends a total of $86 per month on cheese and crackers. This is the minimum amount she needs to spend to purchase the given quantities of each product. Therefore, answer choice A, $86, is the correct answer.

Terry Buys 10 Pounds of Cheese and 12 Boxes of Crackers