After learning about indifference curves, Sandy realizes that her marginal rate of substitution of grapes for cheese is 2. Since the price of cheese is $3 and the price of grapes is $1, Sandy:
A) should buy more grapes and less cheese.
B) should buy more cheese and fewer grapes.
C) is maximizing her utility.
D) is on her highest possible indifference curve.

Question

Quizplus · Accepted Answer

Sandy's marginal rate of substitution (MRS) of 2 means she is willing to give up 2 units of grapes for 1 unit of cheese. However, the price ratio is 3:1, meaning cheese is relatively more expensive. To maximize utility, Sandy should buy more grapes, which are cheaper relative to her MRS.

After Learning About Indifference Curves, Sandy Realizes That Her Marginal