Jeremy maximizes utility by consuming both iced tea and coffee.Iced tea is priced at $1.50 per bottle and coffee at $2.00 per 16-ounce cup.Which of the following marginal utility pairs is inconsistent with Jeremy's consumer equilibrium at these prices?
A) MU of iced tea = 3; MU of coffee = 4
B) MU of iced tea = 4; MU of coffee = 3
C) MU of iced tea = 6; MU of coffee = 8
D) MU of iced tea = 3/4; MU of coffee = 1

Question

Quizplus · Accepted Answer

In consumer equilibrium, the ratio of marginal utility to price should be equal for both goods. For option B, the ratio for iced tea is 4/1.5 and for coffee is 3/2, which are not equal, indicating inconsistency with equilibrium.

Jeremy Maximizes Utility by Consuming Both Iced Tea and Coffee