Use the following to answer question 13:
Figure: Water vs. Soda 2
-(Figure: Water vs. Soda 2) Refer to the figure. These figures show the marginal utility Janet receives when she consumes bottled water and soda. Both water and soda cost $1 each. If Janet has $5 in income, what mix of bottled water and soda will maximize Janet's utility?
A) five bottles of water
B) four bottles of water and three sodas
C) three bottles of water and two sodas
D) 2.5 bottles of water and 2.5 sodas.

Question

Use the following to answer question 13:
Figure: Water vs. Soda 2 
-(Figure: Water vs. Soda 2) Refer to the figure. These figures show the marginal utility Janet receives when she consumes bottled water and soda. Both water and soda cost $1 each. If Janet has $5 in income, what mix of bottled water and soda will maximize Janet's utility?
A) five bottles of water 
B) four bottles of water and three sodas 
C) three bottles of water and two sodas 
D) 2.5 bottles of water and 2.5 sodas.

Quizplus · Accepted Answer

To maximize utility, Janet should consume where the marginal utility per dollar spent is equal for both bottled water and soda. At three bottles of water and two sodas, the marginal utility per dollar spent is the same for both goods. At this point, Janet has spent $5 and has gained a total utility of 22 utils, which is the highest she can achieve given her income and the prices of the goods.

Use the Following to Answer Question 13