Answer to Question #281917 in Economics for Jaber

Question

7. Assume Amanda always maximizes her total utility given her budget constraint. Every morning for breakfast she has four eggs and two sausages. If the marginal utility of the last egg is 10 units and the price of eggs is $2 each, what can we say about the marginal utility of the last sausage if the price of each sausage is $2?

A. It must be equal to 10 units.

B. It must be equal to 5 units.

C. It must be equal to 1 unit.

D. It must be equal to 20 units.

Answer 1

If the price of each sausage is $2, then must be equal to 10 units to maximise total utility using equation MU1/P1 = MU2/P2.

So, the correct answer is A.