Suppose that a consumer purchases a combination of X and Y such that MU_X/P_X = 15 utils per dollar and MU_Y /P_Y = 10 utils per dollar. To maximize utility, the consumer should buy A)less of X and more of Y. B)more of X and less of Y. C)more of both X and Y. D)less of both X and Y. E)neither X nor Y.

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Quizplus · Accepted Answer

To maximize utility, a consumer should equate the marginal utility per dollar spent across all goods. Since the marginal utility per dollar of X (15 utils per dollar) is higher than that of Y (10 utils per dollar), the consumer should buy more of X and less of Y to equalize the marginal utility per dollar spent on each.

Suppose That a Consumer Purchases a Combination of X and Y