Microeconomics: Principles, Problems, & Policies, 20th Edition

Published by McGraw-Hill Education
ISBN 10: 0077660811
ISBN 13: 978-0-07766-081-9

Chapter 7 - Utility Maximization - Discussion Questions - Page 163: 2

Answer

Marginal utility per dollar derived from bread is (80/1) = 80. Marginal utility derived from milk is ( 70/0.8)= 87.5. Since the two utilities per dollar value are not equal, she is not maximizing her total utility. She can maximize her utility by reallocating her funds such that marginal utility per dollar of both items is the same.

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