Answer the question on the basis of the following marginal utility data for products X and Y.Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18. $Y‾1614121086\begin{array}{c}\begin{array}{c}\text {Units}\\\underline{\text {of X }}\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Utility, X}}\\20\\16\\12\\8\\6\\4\end{array}\begin{array}{c}\text {Units}\\\underline{\text {of Y }}\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Utility, Y}}\\16\\14\\12\\10\\8\\6\end{array}\end{array}$
Refer to the data.What quantities of X and Y should be purchased to maximize utility?

A) 2 of X and 1 of Y
B) 4 of X and 5 of Y
C) 2 of X and 5 of Y
D) 2 of X and 6 of Y

Question

Answer the question on the basis of the following marginal utility data for products X and Y.Assume that the prices of X and Y are $4 and $2 respectively and that the consumer's income is $18.

Y‾1614121086\begin{array}{c}\begin{array}{c}\text {Units}\\\underline{\text {of X }}\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Utility, X}}\\20\\16\\12\\8\\6\\4\end{array}\begin{array}{c}\text {Units}\\\underline{\text {of Y }}\\1\\2\\3\\4\\5\\6\end{array}\begin{array}{c}\text {Marginal}\\\underline{\text {Utility, Y}}\\16\\14\\12\\10\\8\\6\end{array}\end{array}

Refer to the data.What quantities of X and Y should be purchased to maximize utility?

A) 2 of X and 1 of Y
B) 4 of X and 5 of Y
C) 2 of X and 5 of Y
D) 2 of X and 6 of Y

Melania Trump · Accepted Answer

Final Answer : C, Explanation :  To maximize utility, the consumer should continue to consume X and Y until the point where the marginal utility per dollar spent is equal. In this case, MUx/Px = 3/4 and MUy/Py = 4/2 = 2. The consumer should purchase more of the good with the higher marginal utility per dollar spent, which in this case is Y. The consumer should purchase 2 units of X and 5 units of Y, which would cost a total of $18 (4*2+2*5).

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