Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The consumer is maximizing total utility because the marginal utility per dollar spent is higher for apples.
B
The consumer should buy more oranges because they provide more total utility.
C
The consumer should stop buying apples to increase total utility since oranges are cheaper.
D
The consumer is maximizing total utility because the marginal utility per dollar spent is equal for both fruits.
Understanding the Answer
Let's break down why this is correct
Answer
To understand the consumer's spending behavior, we need to look at the marginal utility per dollar spent on each fruit. For apples, the marginal utility is 20 utils, and since they cost $2, the marginal utility per dollar is 10 utils ($20/2). For oranges, with a marginal utility of 15 utils and a price of $1, the marginal utility per dollar is 15 utils ($15/1). Since the consumer gets more utility per dollar from oranges than from apples, it makes sense for them to buy more oranges to maximize their total satisfaction within their $10 budget. Therefore, the consumer is not spending in the most efficient way, as they should focus on buying more oranges rather than apples.
Detailed Explanation
The consumer gets more satisfaction per dollar from apples. Other options are incorrect because This suggests that oranges are better overall; This implies that price alone matters.
Key Concepts
Marginal Utility
Consumer Choice
Budget Constraint
Topic
Marginal Utility and Consumer Choice
Difficulty
easy level question
Cognitive Level
understand
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