Question

LaToya is buying con chips and soda. She has 4 bags of corn chips and 5 bottles of soda in her shopping cart. The marginal utility of the fourth bag of corn chips is 10, and the marginal utility of the fifth bottle of soda is also 10·ls LaToya maximizing utility?
A. No. She is not maximizing marginal utility
B. This cannot be determined because we do not know the price of corn chips and soda and whether or not she fully spent her budget allocated to com chips and soda
C. Yes. She is maximizing utility.
D. No. She is maximizing marginal utility but not total utility.

Answer 1

Answer: The answer is B. This cannot be determined because we do not know the price of corn chips and soda and whether or not she fully spent her budget allocated to com chips and soda.

Explanation: Marginal utility refers to the extra satisfaction a consumer achieves from purchasing additional units of a particular commodity.

Now, in order for us to fully determined if LaToya is maximizing her utility, we will need to know the prices at which the products consumed have been bought and we will then compare them with each other. We will also need to know the budget constraints that LaToya is working with in order to fully determine if the utility has been maximized.

This is because Marginal Utility is usually calculated as the Marginal utility gotten from a commodity divided by the price of that commodity, this helps to know how much utility is gotten per unit dollar spent.