The following table shows Mia's $ marginal utility for litres of soya milk:

-Refer to the above table to answer this question.Suppose that Mia has a budget of $7 and the price of a litre of soya milk is $1,what is the maximum quantity that Mia might purchase?
A)0.
B)4 litres.
C)5 litres.
D)6 litres.
E)Cannot be determined.

Question

The following table shows Mia's $ marginal utility for litres of soya milk:
 
-Refer to the above table to answer this question.Suppose that Mia has a budget of $7 and the price of a litre of soya milk is $1,what is the maximum quantity that Mia might purchase?
A)0. 
B)4 litres. 
C)5 litres. 
D)6 litres. 
E)Cannot be determined.

Quizplus · Accepted Answer

Mia's total utility maximizes when her marginal utility is equal to the price of the good she is buying. In this case, Mia's marginal utility equals the price of the good at 5 litres. If she purchases any more, her marginal utility declines and she will not maximize her total utility. Given her budget of $7, she can purchase a maximum of 5 litres, as the total cost of 5 litres will be $5 and leave $2 remaining which is not enough to purchase another litre. Therefore, the maximum quantity of soya milk that Mia can purchase is 5 litres.

The Following Table Shows Mia's $ Marginal Utility for Litres