Joseph chooses a combination of apples and oranges along his budget line.The marginal rate of substitution of apples in place of oranges is 2, the price of an apple is $0.50, and the price of an orange is $0.50.Joseph:
A)is maximizing total utility.
B)should consume more apples and fewer oranges to maximize total utility.
C)should consume fewer apples and more oranges to maximize total utility.
D)may or may not be maximizing total utility.

Question

Quizplus · Accepted Answer

The marginal rate of substitution (MRS) is the rate at which a consumer is willing to trade one good for another while keeping their total utility constant. In this case, the MRS of apples for oranges is 2, which means that Joseph is willing to give up 2 oranges to get 1 apple and still be at the same level of utility. The price of an apple is $0.50, and the price of an orange is $0.50. This means that Joseph can buy 2 apples for the same price as 1 orange. Therefore, Joseph should consume more apples and fewer oranges to maximize his total utility.

Joseph Chooses a Combination of Apples and Oranges Along His