Katie finds that the marginal utility from a compact disc is 30 and the marginal utility from a pizza is 10. The price of a compact disc is $15 and the price of a pizza is $10. In order to increase her utility, Katie should
A) consume more compact discs and fewer pizzas.
B) consume fewer compact discs and more pizzas.
C) not change her consumption of pizza and compact discs.
D) consume fewer compact discs and fewer pizzas.

Question

Quizplus · Accepted Answer

Katie should consume more compact discs and fewer pizzas because the marginal utility per dollar spent on compact discs is higher than the marginal utility per dollar spent on pizza.

Katie Finds That the Marginal Utility from a Compact Disc