Suppose that Coke and Sprite each sell for $2 a can. Each month Joe buys 6 cans of Sprite and 30 cans of Coke. From this we can infer that: A)Joe is buying too many cans of Sprite. B)Joe is buying too many cans of Coke. C)Joe is maximizing his utility if his marginal utility from the 6^th can of Sprite he buys is less than his marginal utility from the 30^th can of Coke he buys. D)Joe is maximizing his utility if his marginal utility from the 6^th can of Sprite he buys is equal to his marginal utility from the 30^th can of Coke he buys.

Question

Quizplus · Accepted Answer

Joe is maximizing his utility when his marginal utility per dollar spent on each good is equal. If the marginal utility per dollar spent on Sprite was greater than that of Coke, he would want to buy more Sprite. If it was less, he would want to buy more Coke. Therefore, if he buys 6 cans of Sprite and 30 cans of Coke each month, he is maximizing his utility.

Suppose That Coke and Sprite Each Sell for $2 a Can