The marginal utility of good X is 6 and the marginal utility of good Y is 18. The price of good X is $2. The price of good Y must be ________ if the consumer is optimizing her utility.
A) $5
B) $6
C) $18
D) $15

Question

Quizplus · Accepted Answer

To optimize utility, the consumer should equalize the marginal utility per dollar spent on each good. The marginal utility per dollar for good X is 6/2 = 3. To have the same marginal utility per dollar for good Y, we set 18/Price of Y = 3. Solving for the price of Y gives us $6.

The Marginal Utility of Good X Is 6 and the Marginal