Podrick enjoys consuming sandwiches (S) and juice boxes (J). Suppose that Podrick has $20 in his budget, the price of a sandwich is $4, and the price of a juice box is $2. If Podrick spends all of his $20 budget and has maximized his utility, which of the following must be true?
A) The marginal utility of a sandwich is equal to the marginal utility of a juice box.
B) The marginal utility of a sandwich is twice the marginal utility of a juice box.
C) The marginal utility of a sandwich is four times the marginal utility of a juice box.
D) The marginal utility of a sandwich is half of the marginal utility of a juice box.

Question

Quizplus · Accepted Answer

To maximize utility, consumers allocate their budget in a way that the last dollar spent on each good provides the same marginal utility. Since the price of a sandwich ($4) is twice the price of a juice box ($2), the marginal utility of a sandwich must be twice the marginal utility of a juice box to ensure that the marginal utility per dollar spent is equal across both goods.

Podrick Enjoys Consuming Sandwiches (S) and Juice Boxes (J)