At his current consumption of lobster and hamburgers,Ike's marginal utility from eating lobster is 30 and from hamburger is 5.If the price of a hamburger is $3,and the price of lobster is $20,Ike should:
A)purchase less lobster and hamburger in equal amounts.
B)purchase more lobster and fewer hamburgers.
C)purchase less lobster and more hamburgers.
D)purchase more lobster and hamburger in equal amounts.

Question

Quizplus · Accepted Answer

Ike should choose the option that maximizes his total utility per dollar spent. We can find the marginal utility per dollar of each item by dividing the marginal utility by the price. For lobster, it is 30/20 = 1.5, and for hamburger, it is 5/3 = 1.67.

Since the marginal utility per dollar of hamburger is higher, Ike should purchase more hamburgers and fewer lobsters. Therefore, option C- purchase less lobster and more hamburgers, is the best choice.

At His Current Consumption of Lobster and Hamburgers,Ike's Marginal Utility