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.

Question

Quizplus · Accepted Answer

Amanda maximizes her utility by equating the marginal utility per dollar spent on each good. For eggs, the marginal utility per dollar is 10 utils/$1 = 10 utils. For sausages, the marginal utility per dollar should also be 10 utils, so the marginal utility of the last sausage must be 20 utils (20 utils/$2 = 10 utils).

Assume Amanda Always Maximizes Her Total Utility Given Her Budget