Tom is maximizing utility by buying three packs of bubble gum and four packages of Skittles. Given diminishing marginal utility, if the price of Skittles rises, the principle of rational choice tells us that Tom will buy:
A) more Skittles, raising the opportunity cost of not consuming Skittles.
B) fewer Skittles, raising the opportunity cost of not consuming Skittles.
C) more Skittles, lowering the opportunity cost of not consuming Skittles.
D) fewer Skittles, lowering the opportunity cost of not consuming Skittles.

Question

Quizplus · Accepted Answer

With diminishing marginal utility, a price increase will lead to a decrease in quantity demanded. This is because the opportunity cost of consuming Skittles has increased, making it more attractive to consume other goods, such as bubble gum.

Tom Is Maximizing Utility by Buying Three Packs of Bubble