Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Item A only
B
Item B only
C
Both Item A and Item B
D
Neither Item A nor Item B
Understanding the Answer
Let's break down why this is correct
Answer
The consumer compares the satisfaction each dollar buys. Item A gives 50 units for $10, so 5 units per dollar, while Item B gives 80 units for $20, which is 4 units per dollar. Because 5 > 4, Item A provides a higher marginal utility per dollar. With a $30 budget, buying three A’s gives 150 units, whereas buying one B and one A gives only 130 units, confirming that A yields the greater marginal benefit. Thus Item A is the better choice for maximizing satisfaction per dollar.
Detailed Explanation
Buying Item A gives 5 units of satisfaction for each dollar spent, while Item B gives only 4 units per dollar. Other options are incorrect because The mistake is thinking the larger total satisfaction (80 units) is the best; It seems fair to say both are good, but their ratios differ.
Key Concepts
Marginal Utility Per Dollar
Opportunity Cost
Topic
Marginal Utility Per Dollar
Difficulty
medium level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1A consumer has a budget of $100 and is considering two products: Product X, which provides 20 units of utility for $20, and Product Y, which provides 30 units of utility for $30. If the consumer wants to maximize their utility while accounting for opportunity cost, which product should they choose to purchase if they can only choose one?
hardEconomics
Practice
2
Question 2If a consumer has a budget of $50 and prefers to buy two goods, A and B, how can they maximize their satisfaction given that good A costs $10 and good B costs $5?
easyEconomics
Practice
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