Brandon receives a marginal utility of 5,4,3,2,1,and 0 from eating successive donuts.Successive cups of coffee provide him with 9,8,6,4,3,and 2 utils of marginal utility.Donuts cost 50 cents each,coffee costs $1 per cup,and Brandon has $3 to spend.Which of the following options will yield Brandon the greatest utility?
A) six donuts
B) four donuts and one cup of coffee
C) two donuts and two cups of coffee

Question

Quizplus · Accepted Answer

To maximize utility, we need to spend all $3 and choose the combination that gives us the greatest total marginal utility (MU) per dollar spent. 
Six donuts would cost $3 and give us a total MU of 15, which means a total MU per dollar spent of 5. 
Four donuts and one cup of coffee would cost $2.50 and give us a total MU of 23, which means a total MU per dollar spent of 9.2. 
Two donuts and two cups of coffee would cost $3 and give us a total MU of 21, which means a total MU per dollar spent of 7. 
Therefore, the best choice would be option C - two donuts and two cups of coffee, as it yields the greatest total marginal utility per dollar spent.

Brandon Receives a Marginal Utility of 5,4,3,2,1,and 0 from Eating