In a month, Samantha consumes the quantity of lobster dinners so that her margin

Question

In a month, Samantha consumes the quantity of lobster dinners so that her marginal utility from a lobster dinner is 500 units. The price of a lobster dinner is $25. She also is consuming the quantity of spaghetti dinners so that its marginal utility is 300 units, while its price is $15. Samantha is allocating her entire budget. What should she do to maximize her total utility?

a) consume the current combination of lobster and spaghetti dinners
b)consume more lobster dinners and fewer spaghetti dinners
c)consume more spaghetti dinners and fewer lobster dinners
d)not enough information is given to answer the question

Explanation / Answer

Call lobster dinners good x and spaghetti dinners good y. For Samantha to be maximizing her utility marginal utility of x/price of x must equal marginal utility of y/price of y MUx/Px = MUy/Py So we have 500/25 = 300/15 20 = 20 From this we can see that the current combination is optimal, so the answer is A

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