Suppose an individual knows that the marginal utility he receives from the next apple is 5 and that the price of an apple is $2. He also knows that the marginal utility he receives from the next orange is 3 and the price of an orange is $1. If the individual is choosing optimally, the next good he will buy is
A)an orange because the marginal utility per dollar spent on an orange is greater.
B)an orange because the marginal utility of the orange is greater.
C)an apple because the marginal utility per dollar spent on an apple is greater.
D)an apple because the marginal utility of the apple is greater.

Question

​Suppose an individual knows that the marginal utility he receives from the next apple is 5 and that the price of an apple is $2. He also knows that the marginal utility he receives from the next orange is 3 and the price of an orange is $1. If the individual is choosing optimally, the next good he will buy is
A)​an orange because the marginal utility per dollar spent on an orange is greater.
B)​an orange because the marginal utility of the orange is greater.
C)​an apple because the marginal utility per dollar spent on an apple is greater.
D)​an apple because the marginal utility of the apple is greater.

Quizplus · Accepted Answer

The marginal utility per dollar spent on an orange is 3 (marginal utility) / $1 (price) = 3, which is greater than the marginal utility per dollar spent on an apple, which is 5 (marginal utility) / $2 (price) = 2.5. Therefore, the individual will get more utility per dollar by buying an orange.

​Suppose an Individual Knows That the Marginal Utility He Receives

Suppose an Individual Knows That the Marginal Utility He Receives