With marginal utility per dollar of 10 on one good and 15 on another, what should the consumer do?

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Question

With marginal utility per dollar of 10 on one good and 15 on another, what should the consumer do?

Accepted Answer

Buy more of the good yielding 15 and less of the other, gaining 5 units per dollar switched — Award 1 mark. As they switch, marginal utility falls on one good and rises on the other until the two ratios are equal.

Answer

Stop buying the good yielding 10 entirely

Answer

Buy more of the good yielding 15 and less of the other, gaining 5 units per dollar switched

Answer

Buy more of the good yielding 10, since it has the higher marginal utility

Answer

Keep spending unchanged, since both goods give positive utility

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