A child is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from each product are as shown in the following table. Based on taste and preference alone, which good does the child prefer?
A) chocolates
B) hard candies
C) The child equally likes chocolates and hard candies.
D) One cannot tell from the given data.

Question

A child is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from each product are as shown in the following table.  Based on taste and preference alone, which good does the child prefer?
A) chocolates 
B) hard candies 
C) The child equally likes chocolates and hard candies. 
D) One cannot tell from the given data.

Quizplus · Accepted Answer

The marginal utility per dollar for hard candies is higher than that for chocolates. Therefore, the child will prefer to spend their money on hard candies.

A Child Is Given $4 of Pocket Money to Be