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bogdanovich [222]
3 years ago
7

Jessica spends all her income on two goods, A and B. The price of A is $5, and the price of B is $7. At the current consumption

bundle, the marginal utility of A is 10, and the marginal utility of B is 21. To maximize utility given her income, Jessica should:_____________
Business
1 answer:
masha68 [24]3 years ago
5 0

Answer:

Jessica should consume more of good A.

Explanation:

Jessica spends all her income on two goods, A and B.

The price of A is $5, and the price of B is $7.

At the current consumption bundle, the marginal utility of A is 10, and the marginal utility of B is 21.

The total utility is maximized when the ratio of marginal utility and price of the goods consumed is equal for all the goods in the bundle.

The ratio for Good A

= \frac{10}{5}

= 2

The ratio for good B

= \frac{21}{7}

= 3

Since the ratio is higher for good B, the consumer should shift from consumption of good B to good A until the ratio is equal for both the goods.

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4 years ago
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3 years ago
Milford Company sells a motor that carries a three-month unconditional warranty against product failure. Based on a reliable sta
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Answer: See explanation

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