Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The marginal utility per dollar spent on both fruits is equal.
B
Apples and oranges provide the same total utility.
C
The price of oranges is lower than the price of apples.
D
The consumer prefers oranges over apples and buys them in excess.
Understanding the Answer
Let's break down why this is correct
Answer
The consumer chooses the bundle where the extra satisfaction from spending the last dollar on an apple equals the extra satisfaction from spending the last dollar on an orange. In other words, the marginal utility per dollar is the same for apples and oranges. If the marginal utility per dollar were higher for one fruit, the consumer could increase total utility by buying more of that fruit and less of the other. This equalization of marginal utility per dollar is the reason why the bundle of four apples and four oranges is optimal. For example, if the marginal utility of an apple is 8 and its price is $2, the marginal utility per dollar is 4; if an orange’s marginal utility is 6 and its price is also $2, the marginal utility per dollar is also 4, making the mix optimal.
Detailed Explanation
Buying four apples and four oranges gives the best overall happiness because the extra satisfaction you get from each dollar spent on both fruits is the same. Other options are incorrect because Thinking that apples and oranges give identical total happiness is incorrect; Saying oranges are cheaper is not the main reason for the optimal mix.
Key Concepts
Marginal Utility
Consumer Choice Theory
Budget Constraints
Topic
Optimal Purchase Combinations
Difficulty
easy level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1If a consumer has a budget of $7, how should they allocate their spending between apples and oranges to maximize their satisfaction?
easyEconomics
Practice
2
Question 2If a consumer is maximizing utility with a budget of $20, which combination of apples and oranges maximizes total utility given the marginal utilities and prices?
mediumEconomics
Practice
3
Question 3When considering optimal purchase combinations, which of the following statements are true regarding consumer choices and utility maximization? Select all that apply.
hardEconomics
Practice
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