In consumer equilibrium,the marginal utility of good A,B and C are 100,300,and 400 respectively.If the price of good A was $35,then the prices of goods B and C,respectively,are:
A) $105 and $140.
B) $140 and $105.
C) $105 and $175.
D) $140 and $175.

Question

Quizplus · Accepted Answer

In consumer equilibrium, the ratio of marginal utility to price is equal for all goods. Therefore, MU_A/P_A = MU_B/P_B = MU_C/P_C. Given MU_A = 100, P_A = $35, MU_B = 300, and MU_C = 400, we can solve for P_B and P_C:  100/35 = 300/P_B => P_B = $105  100/35 = 400/P_C => P_C = $140

In Consumer Equilibrium,the Marginal Utility of Good A,B and C