Kati-Lyn has to choose between eating Chinese food and Indian food.Both Chinese food and Indian food cost the same.Which of the following equations,where MU is marginal utility and U is total utility,will lead to the optimal level of consumption?

Question

Quizplus · Accepted Answer

The optimal level of consumption occurs where the marginal utility per dollar spent is the same for both Chinese and Indian food. As both cost the same, the equation should be: MUS/U = MU/Price. Since the cost is the same, MU/Price will be the same for both Chinese and Indian food. Therefore, the equation will simplify to:
MUS/U = MUI/U
or
MUS = MUI
This means that the marginal utility of Chinese food should be equal to the marginal utility of Indian food. This equation is represented in choice C.

Kati-Lyn Has to Choose Between Eating Chinese Food and Indian