For two goods, coffee and scones, suppose that MU(coffee)/P(coffee)= 4 and MU(scones)/P(scones)= 3. To maximize your total utility from these two goods, you should purchase:
A)less coffee and more scones.
B)more coffee and fewer scones.
C)less coffee and fewer scones.
D)more coffee and more scones.

Question

Quizplus · Accepted Answer

Since the ratio of marginal utility to price (i.e., marginal utility per dollar spent)is higher for coffee than for scones, the consumer should buy more coffee and fewer scones. The utility gained from spending an additional dollar on coffee will exceed the utility lost from spending a dollar less on scones; hence, total utility will rise.

For Two Goods, Coffee and Scones, Suppose That MU(coffee)/P(coffee)= 4