Suppose you are consuming two goods, A and B. Your marginal utility of good A is

Question

Suppose you are consuming two goods, A and B. Your marginal utility of good A is 20, and your marginal utility of good B is 4. The price of good A is $10, and the price of good B is $2. a. In this case, you are (Click to select) b. You should consume: Instructions: You may select more than one answer. Click the box with a check mark for correct answers and click to empty the box for the wrong answers less of good A 7 more of good A the same amount of good A 12 the same amount of good B ? more of good B

Explanation / Answer

As per law of equi-marginal utility,a consumer consumes two goods until marginal utility to price ratio of both goods Is same.

MUa/ Pa = MUb/Pb

20/10 = 4/2 = 2

The consumer is maximizing his utility at this consumption level. He should continue to consume same song of good a and b.

Answer is 3 and 4

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