Suppose that Jen receives 400 units of utility from her last soda and 200 units of utility from her last slice of pizza.What can we conclude about Jen's choices if the price of a soda is $1 and the price of a slice of pizza is $2?
A) Jen is maximizing utility because she buys more of the good providing the most utility.
B) Jen should buy more soda to maximize her utility.
C) Jen should buy more pizza to maximize her utility.
D) Jen needs to buy less soda and less pizza to maximize her utility.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

Jen receives 400 units of utility from a soda, which costs $1, and 200 units of utility from a slice of pizza, which costs $2. To maximize utility, she should equate the marginal utility per dollar spent across all goods. Here, the utility per dollar for soda is 400 units/$1 = 400, and for pizza, it's 200 units/$2 = 100. Since the utility per dollar is higher for soda, Jen should buy more soda to maximize her utility.

Suppose That Jen Receives 400 Units of Utility from Her