The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8. If the consumer spends the given budget and gets maximum utility out of it, then she is receiving how much satisfaction from each dollar spent on the final unit of good A consumed?
A) 14 utils per dollar
B) 7 utils per dollar
C) 8 utils per dollar
D) 4 utils per dollar

Question

The table shows the marginal-utility schedules for goods A and B for a hypothetical consumer. The price of good A is $1, and the price of good B is $2. The income of the consumer is $8.  If the consumer spends the given budget and gets maximum utility out of it, then she is receiving how much satisfaction from each dollar spent on the final unit of good A consumed?
A) 14 utils per dollar 
B) 7 utils per dollar 
C) 8 utils per dollar 
D) 4 utils per dollar

Quizplus · Accepted Answer

To determine the best choice, we need to compare the marginal utility per dollar of each good. The formula for marginal utility per dollar is MU/Price. For the last unit of good A, the marginal utility is 14 and the price is $1, so the marginal utility per dollar is 14/1 = 14. For the last unit of good B, the marginal utility is 16 and the price is $2, so the marginal utility per dollar is 16/2 = 8. Therefore, the consumer receives more satisfaction per dollar spent on the final unit of good A consumed, making it the best choice.

The Table Shows the Marginal-Utility Schedules for Goods a and B