Question

For lunch, Maria eats only salads or vegetarian burgers. Her weekly food budget is $36. Each salad costs $6 and each vegetarian burger costs $3. When deciding how much of each good to buy, Maria knows that 2 salads and 4 vegetarian burgers will give her a utility of 8. Maria’s utility-maximizing point is:A. 6 salads, 1 vegetarian burgerB. 4 salads, 6 vegetarian burgersC. 3 salads, 6 vegetarian burgersD. 2 salads, 8 vegetarian burgers

Answer 1

Answer:

The correct answer is C.

Explanation:

Supposing that more is preferred to less, Maria would never choose a point where she's below her budget line. That is, Maria will spend all of her rent.

Therefore we can already discard possibilities like:

• A. Because $M=6*(6)+3*(1)=33$ ⇒ $33<$36

The individual is not maximizing utility is she were to choose this bundle.

• B. Because $M=6*(4)+3*(6)=42$ ⇒ $42>$36

This bundle is beyond what Maria can afford.

Further, assuming that Maria has convex preferences, she'll choose a point where she buys more of both goods rather than specializing in the consumption of one of them. That leaves bundle D aside over bundle C because even though both bundles satisfy her budget condition M=$36, bundle C provides more utility to Maria than bundle D for being located in a more centric solution along her budget line.