If MU_a/P_a = 100/$35 = MU_b/P_b = 300/? = MU_c/P_c = 400/?,the prices of products B and C in consumer equilibrium: A) cannot be determined from the information given. B) are $105 and $140 respectively. C) are $105 and $175 respectively. D) are $100 and $200 respectively.

Question

Quizplus · Accepted Answer

In consumer equilibrium, the marginal utility per dollar spent is equal across all goods. Solving 300/? = 100/35 gives ? = $105 for product B. Solving 400/? = 100/35 gives ? = $140 for product C.

If MUa/Pa = 100/$35 = MUb/Pb = 300/? = MUc/Pc

If MU_a/P_a = 100/$35 = MU_b/P_b = 300/? = MU_c/P_c