Exhibit 6-5 Marginal utility data for desserts

Refer to Exhibit 6-5. Each dessert is priced at $1. If you had $10 to spend on desserts, which of the following combinations of goods would you buy?
A) 5 units of brownies, 4 units of ice cream, and 1 unit of pie.
B) 4 units of brownies, 5 units of ice cream, and 1 unit of pie.
C) 4 units of brownies, 4 units of ice cream, and 2 units of pie.
D) 4 units of brownies, 3 units of ice cream, and 3 units of pie.

Question

Exhibit 6-5 Marginal utility data for desserts

Refer to Exhibit 6-5. Each dessert is priced at $1. If you had $10 to spend on desserts, which of the following combinations of goods would you buy?
A) 5 units of brownies, 4 units of ice cream, and 1 unit of pie. 
B) 4 units of brownies, 5 units of ice cream, and 1 unit of pie. 
C) 4 units of brownies, 4 units of ice cream, and 2 units of pie. 
D) 4 units of brownies, 3 units of ice cream, and 3 units of pie.

Quizplus · Accepted Answer

To maximize utility, the consumer should allocate their spending so that the marginal utility per dollar is equal for each good. In this case, the marginal utility per dollar for brownies and ice cream is highest initially, but decreases as more units are consumed. The marginal utility per dollar for pie, on the other hand, is lower initially but does not decrease as quickly as for brownies and ice cream. Therefore, the consumer should purchase a combination of all three goods such that the marginal utility per dollar is equal for each good. The combination of 4 units of brownies, 4 units of ice cream, and 2 units of pie achieves this balance and maximizes utility.

Exhibit 6-5 Marginal Utility Data for Desserts