Assume Amanda always maximizes her total utility given her budget constraint.Every morning for breakfast she has two eggs and three sausages.If the marginal utility of the last egg is 10 utils and the price of eggs is $1 each,what can we say about the marginal utility of the last sausage if the price of each sausage is $2?
A)It must be equal to 20 utils.
B)It must be equal to 10 utils.
C)It must be equal to 5 utils.
D)It must be equal to 1 utils.

Question

Quizplus · Accepted Answer

Amanda maximizes her utility when the marginal utility per dollar spent is equal for all goods. Therefore, the marginal utility of the last sausage divided by its price ($2) must equal the marginal utility of the last egg divided by its price ($1). Thus, 10 utils/$1 = MU_sausage/$2, leading to MU_sausage = 20 utils.

Assume Amanda Always Maximizes Her Total Utility Given Her Budget