Refer to the figure below. If the price of a t-shirt is $10 and the price of a sweater is $40, then the rational spending is satisfied when the consumer purchases ______ t-shirts and ______ sweaters. $$\begin{array} { | c | c | c | }
\hline \text { Units } & \begin{array} { c }
\text { Utils Per Year } \
\text { from T-shirts }
\end{array} & \begin{array} { c }
\text { Utils Per Year } \
\text { from Sweaters }
\end{array} \
\hline 0 & 0 & 0 \
\hline 1 & 75 & 400 \
\hline 2 & 135 & 720 \
\hline 3 & 180 & 960 \
\hline 4 & 210 & 1120 \
\hline
\end{array}$$
A)1; 4
B)3; 2
C)4; 4
D)2; 3

Question

Refer to the figure below. If the price of a t-shirt is $10 and the price of a sweater is $40, then the rational spending is satisfied when the consumer purchases ______ t-shirts and ______ sweaters. $$\begin{array} { | c | c | c | } 
\hline \text { Units } & \begin{array} { c } 
\text { Utils Per Year } \
\text { from T-shirts }
\end{array} & \begin{array} { c } 
\text { Utils Per Year } \
\text { from Sweaters }
\end{array} \
\hline 0 & 0 & 0 \
\hline 1 & 75 & 400 \
\hline 2 & 135 & 720 \
\hline 3 & 180 & 960 \
\hline 4 & 210 & 1120 \
\hline
\end{array}$$
A)1; 4
B)3; 2
C)4; 4
D)2; 3

Quizplus · Accepted Answer

Rational spending occurs when the consumer allocates their income in a way that their marginal utility per dollar spent on each item is equal. In this case, the marginal utility per dollar spent on t-shirts is 7.5 and the marginal utility per dollar spent on sweaters is 9. Therefore, the consumer should spend more money on sweaters than t-shirts. The ratio of the prices of t-shirts to sweaters is 1:4, so the consumer should buy four times as many t-shirts as sweaters. Therefore, the rational spending is satisfied when the consumer purchases 2 t-shirts and 3 sweaters, which is choice D.

Refer to the Figure Below A)1; 4 B)3; 2 C)4; 4 D)2; 3

Refer to the Figure Below A)1; 4
B)3; 2
C)4; 4
D)2; 3