Peanuts are $3 per pound and cashew nuts are $5 per pound.If the marginal utility from consuming the last pound of cashew nuts equals 15 utils,then the marginal utility from consuming the last pound of peanuts in consumer equilibrium should equal:
A) 18 utils.
B) 15 utils.
C) 9 utils.
D) 5 utils.

Question

Quizplus · Accepted Answer

In consumer equilibrium, the ratio of marginal utility to price should be equal for all goods. Therefore, (MU of peanuts / Price of peanuts) = (MU of cashews / Price of cashews). Solving for MU of peanuts: (MU of peanuts / 3) = (15 / 5), MU of peanuts = 9 utils.

Peanuts Are $3 Per Pound and Cashew Nuts Are $5