Question

A bottle of wine costs $8 and a quiche costs $5. At Robert’s present levels of consumption, he spends all his income and receives marginal utility of $10 from the last bottle of wine and marginal utility of $4 from the last quiche. To maximize his total utility, Robert should

Answer 1

Answer:

Robert should buy more wine and less quiche.

Explanation:

From the last bottle of wine, marginal utility = $10

a bottle of wine costs $8.

marginal utility/costs = 10/8 = 1.25

From the last bottle of quiche, marginal utility = $4

a bottle of quiche costs $5

marginal utility/costs = 4/5 = 0.8

we can deduce that the marginal utility/costs for wine is more than the marginal utility/costs of the quiche, for the total utility to be maximazed, then the marginal utility of wine shound decrease (buy more wine) and the marginal utility of the quiche should increase(buy less quiche)