Answer the question on the basis of the following marginal utility data for products X and Y.Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18. $\begin{array}{c}
\begin{array}{c}
\text {Units}\
\underline{\text {of X }}\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Utility, X}}\
20\
16\
12\
8\
6\
4
\end{array}
\begin{array}{c}
\text {Units}\
\underline{\text {of Y }}\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Utility, Y}}\
16\
14\
12\
10\
8\
6
\end{array}
\end{array}$
Refer to the data.What quantities of X and Y should be purchased to maximize utility?
A) 2 of X and 1 of Y
B) 4 of X and 5 of Y
C) 2 of X and 5 of Y
D) 2 of X and 6 of Y

Question

Answer the question on the basis of the following marginal utility data for products X and Y.Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18. $\begin{array}{c}
\begin{array}{c}
\text {Units}\
\underline{\text {of  X }}\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Utility, X}}\
20\
16\
12\
8\
6\
4
\end{array}
\begin{array}{c}
\text {Units}\
\underline{\text {of  Y }}\
1\
2\
3\
4\
5\
6
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Utility, Y}}\
16\
14\
12\
10\
8\
6
\end{array}
\end{array}$
 Refer to the data.What quantities of X and Y should be purchased to maximize utility?
A) 2 of X and 1 of Y
B) 4 of X and 5 of Y
C) 2 of X and 5 of Y
D) 2 of X and 6 of Y

Quizplus · Accepted Answer

To maximize utility, the consumer should continue to consume X and Y until the point where the marginal utility per dollar spent is equal. In this case, MUx/Px = 3/4 and MUy/Py = 4/2 = 2. The consumer should purchase more of the good with the higher marginal utility per dollar spent, which in this case is Y. The consumer should purchase 2 units of X and 5 units of Y, which would cost a total of $18 (4*2+2*5).

Answer the Question on the Basis of the Following Marginal