Question

Assume that Maia spends all of her income on halvah (H) and pomegranates (P) and is purchasing the optimal consumption bundle. If MUH/MUP = 3 and the price of halvah is $12, then the price of pomegranates must be:_________.
A. $36.
B. $12.
C. $3.
D. $4.

Answer 1

Answer:

The correct answer is:

$4 (D.)

Explanation:

From the question, we are told that:

the price of halvah (MUH)= $12

the price of pomegranates (MUP)= ????

Next, we are also told that the optimal consumption ratio of MUH to MUP = 3

This means that the Mauginal Utility of halvah (H) to the marginal utility of pomegranates (P) = 3

MUH/MUP = 3

12/MUP = 3

MUP = $\frac{12}{3} = 4$

MUP = $4