-Figure 6-7 shows the marginal utilities Kate receives from buying hamburgers and frozen pizzas,assuming she buys only these two goods.Each hamburger sells for $5 and each pizza sells for $4.If Kate has $27 to spend how many hamburgers and frozen pizzas should she buy?

Question

Quizplus · Accepted Answer

Kate should allocate her budget such that the marginal utility per dollar spent on hamburgers equals the marginal utility per dollar spent on pizzas. With $27, buying 3 hamburgers ($15) and 3 pizzas ($12) uses her entire budget and likely maximizes her utility given the prices.

-Figure 6-7 Shows the Marginal Utilities Kate Receives from Buying