Assume that the marginal utility from good x is 10 units and that the price of good x is $5 per unit. The marginal utility from good y is 15 units and its unit price is $7. In this situation, a utility-maximizing consumer should
A) consume more of good x.
B) consume only good y.
C) consume more of good y.
D) consume neither x nor y.

Question

Quizplus · Accepted Answer

To maximize utility, the consumer should consume more of the good with a higher marginal utility per dollar. In this case, the marginal utility per dollar for good y is higher than that of good x (15/7 > 10/5). Therefore, the consumer should consume more of good y.

Assume That the Marginal Utility from Good X Is 10