The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3

-Derek has $1 to spend at the grocery store. An apple, an orange, and a banana cost $0.50 each. If Derek's MU_A/P_A (ratio of marginal utility to price) of an apple is 45, MU_O/P_O of an orange is 38, and MU_B/P_B of a banana is 52, he will purchase a(n) _____ first and a(n) _____ second.

Question

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3

-Derek has $1 to spend at the grocery store. An apple, an orange, and a banana cost $0.50 each. If Derek's MU_A/P_A (ratio of marginal utility to price) of an apple is 45, MU_O/P_O of an orange is 38, and MU_B/P_B of a banana is 52, he will purchase a(n) _____ first and a(n) _____ second.

Quizplus · Accepted Answer

The highest MU_B/P_B ratio indicates that the banana gives the most utility per dollar spent. Therefore, Derek will purchase a banana first. Among the remaining options, the apple has the highest MU_A/P_A ratio, so Derek will purchase an apple second.

The Below Table Shows the Average Utility (In Utils) Obtained