Suppose the price of good $x$ is $5 and the price of good $y$ is $7. Also, suppose $M M U _ { x } = y$ and $M U _ { y } = x$ . Which of the following baskets could be an interior optimum?
A) x = 5, y = 7
B) x = 4, y = 6
C) x = 7, y = 5
D) x = 6, y = 4

Question

Quizplus · Accepted Answer

At an interior optimum, the ratio of marginal utilities should equal the ratio of prices: $ \frac{MU_x}{MU_y} = \frac{P_x}{P_y} $. Given $MU_x = y$ and $MU_y = x$, the condition becomes $ \frac{y}{x} = \frac{5}{7} $. For option C, $ \frac{5}{7} = \frac{5}{7} $, satisfying the condition.

Suppose the Price of Good xxx Is $5 and the Price of Good

Suppose the Price of Good $x$ Is $5 and the Price of Good