The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3

-Jason is trying to decide whether to buy a bagel or a muffin for breakfast. The bagel costs $0.50 and has a marginal utility of 5. The muffin costs $1 and has a marginal utility of 20. Which should he buy and why?
A)The muffin, because it has a higher marginal utility
B)The muffin, because it has a lower marginal utility
C)The bagel, because it costs less
D)The bagel, because it has a higher marginal utility per dollar
E)The muffin, because it has a higher marginal utility per dollar

Question

The below table shows the average utility (in utils) obtained from the consumption of goods A and B.Table 7.3
 
-Jason is trying to decide whether to buy a bagel or a muffin for breakfast. The bagel costs $0.50 and has a marginal utility of 5. The muffin costs $1 and has a marginal utility of 20. Which should he buy and why?
A)The muffin, because it has a higher marginal utility 
B)The muffin, because it has a lower marginal utility 
C)The bagel, because it costs less 
D)The bagel, because it has a higher marginal utility per dollar 
E)The muffin, because it has a higher marginal utility per dollar

Quizplus · Accepted Answer

To determine the best choice, we need to compare the marginal utility per dollar of each item. The marginal utility per dollar of the bagel is 5 utils per $0.50, or 10 utils per dollar. The marginal utility per dollar of the muffin is 20 utils per $1, or 20 utils per dollar. Therefore, the muffin has a higher marginal utility per dollar and is the better choice for Jason.

The Below Table Shows the Average Utility (In Utils) Obtained