Exhibit 10-1 A consumer is faced with choosing between hamburgers and milkshakes that are priced at $2 and $1,respectively.The marginal utility derived from each of the two goods is as follows:
Refer to Exhibit 10-1.How many hamburgers and milkshakes will be consumed if the consumer maximizes his utility subject to $14 of income each week?
A) 4 hamburgers and 5 milkshakes
B) 5 hamburgers and 4 milkshakes
C) 4 hamburgers and 3 milkshakes
D) 3 hamburgers and 4 milkshakes

Question

Exhibit 10-1 A consumer is faced with choosing between hamburgers and milkshakes that are priced at $2 and $1,respectively.The marginal utility derived from each of the two goods is as follows:
 Refer to Exhibit 10-1.How many hamburgers and milkshakes will be consumed if the consumer maximizes his utility subject to $14 of income each week?
A) 4 hamburgers and 5 milkshakes 
B) 5 hamburgers and 4 milkshakes 
C) 4 hamburgers and 3 milkshakes 
D) 3 hamburgers and 4 milkshakes

Quizplus · Accepted Answer

To maximize utility subject to $14 of income each week, the consumer will allocate their spending such that the marginal utility per dollar spent on each good is equal. In this case, the marginal utility per dollar spent on hamburgers is 5 (11/2) and the marginal utility per dollar spent on milkshakes is 2 (2/1). Therefore, the consumer will buy more hamburgers than milkshakes to maximize their utility. Using the marginal utility per dollar spent on hamburgers as a ratio, the consumer will buy 5 hamburgers and 4 milkshakes, for a total cost of $13 (5x$2 + 4x$1) and leaving $1 of their weekly income unspent.

Exhibit 10-1 a Consumer Is Faced with Choosing Between Hamburgers