The following graph shows the marginal utility derived from milk and giant cookies purchased by Sandeep.

-Refer to the above graph to answer this question.If the price of milk is $2,the price of a cookie is $1 and Sandeep has a budget of $7,how many will he purchase if he wishes to maximize his total utility?
A)0 milk and 7 cookies.
B)1 milk and 5 cookies.
C)2 milk and 3 cookies.
D)3 milk and 1 cookie.
E)3 milk and 4 cookies.

Question

The following graph shows the marginal utility derived from milk and giant cookies purchased by Sandeep.
 
-Refer to the above graph to answer this question.If the price of milk is $2,the price of a cookie is $1 and Sandeep has a budget of $7,how many will he purchase if he wishes to maximize his total utility?
A)0 milk and 7 cookies. 
B)1 milk and 5 cookies. 
C)2 milk and 3 cookies. 
D)3 milk and 1 cookie. 
E)3 milk and 4 cookies.

Quizplus · Accepted Answer

To maximize total utility within a budget of $7, Sandeep should purchase items that give him the highest utility per dollar spent. Assuming the graph (which is not visible) shows the utility gained from milk and cookies, the optimal choice would be the one that maximizes utility within the budget constraint. Without the graph, we typically calculate the utility per dollar for each item and allocate the budget to get the most utility. Given the choices, option C (2 milk at $2 each and 3 cookies at $1 each) fits the budget of $7 and is likely to be the choice that maximizes utility based on the given prices and budget constraint.

The Following Graph Shows the Marginal Utility Derived from Milk