Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Buy more of good A and less of good B
B
Buy equal amounts of both goods
C
Buy more of good B and less of good A
D
Stop consuming both goods
Understanding the Answer
Let's break down why this is correct
Answer
When a consumer is choosing between two goods, A and B, they want to get the most satisfaction or utility for their money. If the marginal utility per dollar spent on good A is higher than that of good B, it means that for each dollar spent on good A, the consumer gets more satisfaction compared to spending that dollar on good B. Therefore, to maximize utility, the consumer should buy more of good A and less of good B. For example, if good A gives 10 units of satisfaction for every dollar spent, while good B only gives 5 units, it makes sense to spend more on good A to get more overall happiness. By reallocating their spending in this way, the consumer can enjoy a greater total utility.
Detailed Explanation
When good A gives more satisfaction per dollar, it makes sense to buy more of it. Other options are incorrect because Buying equal amounts means you ignore which good gives you more satisfaction; Choosing more of good B means you are wasting money on something that gives less satisfaction.
Key Concepts
Consumer Utility Maximization
Marginal Utility
Resource Allocation
Topic
Consumer Utility Maximization
Difficulty
medium level question
Cognitive Level
understand
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