Question

A buyer has $20 to spend on rice and beans. Rice costs $2 and beans cost $3 per pound. The buyer is buying the combination of 4 pounds of rice and 4 pounds of beans. At this combination, her marginal benefit from rice is $14 and her marginal benefit from beans is $18. This buyer should ________. a. buy less beans and more rice b. buy more rice and less beans c. buy more of both rice and beans d. not change his consumption

Answer 1

Answer: Buy more of both rice and beans

             

Explanation: Marginal benefit refers to the additional benefit that a customer get by consuming one additional unit of a commodity.

In the given case, the marginal benefit for the customer is positive for both of the goods.  Also if he chooses to but one more unit of anything in place of other than he will not able to use his budget properly.

Thus, from the above we can conclude that the correct option is C.