Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
4 apples and 4 oranges
B
2 apples and 6 oranges
C
5 apples and 3 oranges
D
3 apples and 5 oranges
Understanding the Answer
Let's break down why this is correct
Answer
When a consumer wants to use a $20 budget to get the most pleasure, they compare the marginal benefit of each good to its price by looking at marginal utility per dollar. If an apple gives 10 extra units of satisfaction for $2, its MU per dollar is 10 ÷ 2 = 5; if an orange gives 8 units for $1, its MU per dollar is 8 ÷ 1 = 8. Because the orange gives more satisfaction for each dollar spent, the consumer buys oranges first until the MU per dollar of oranges drops below that of apples. After spending $10 on oranges, the remaining $10 would be used to buy apples, giving the highest total utility. This rule—buy the good with the highest marginal utility per dollar until the budget is exhausted—ensures the consumer maximizes total utility.
Detailed Explanation
Buying 4 apples and 4 oranges uses all $20 and gives the same utility per dollar for apples and oranges. Other options are incorrect because Choosing 2 apples and 6 oranges spends more on oranges; Picking 5 apples and 3 oranges spends too much on apples.
Key Concepts
Optimal Purchase Combinations
Marginal Utility
Consumer Choice Theory
Topic
Optimal Purchase Combinations
Difficulty
medium level question
Cognitive Level
understand
Practice Similar Questions
Test your understanding with related questions
1
Question 1If a consumer has a budget of $40 to spend on goods C and D, where good C is priced at $8 and good D at $4, which combination of goods would best optimize their utility?
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2
Question 2If the relationship between budget allocation and consumer satisfaction can be represented as Apples:Utility :: Oranges: ? What is the missing term that best completes the analogy based on the concept of Marginal Utility Per Dollar?
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3
Question 3Maria has a budget of $7 to spend on apples and oranges. The marginal utility from the last apple she consumes is 5 utils, and the price of an apple is $1. The marginal utility from the last orange she consumes is 6 utils, and the price of an orange is $2. How should Maria allocate her budget to maximize her utility?
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4
Question 4If a consumer has a budget of $7, how should they allocate their spending between apples and oranges to maximize their satisfaction?
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5
Question 5If a consumer finds that the marginal utility per dollar spent on apples is greater than that of oranges, what is the most likely cause of this effect?
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6
Question 6If a consumer is maximizing their total utility by purchasing four apples and four oranges, what underlying reason explains this optimal purchase combination?
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