Question

Assume Amanda always maximizes her total utlity given her budget constraint. Every morning for breakfast she has two eggs and three sausages. If the marginal utility of the last egg is 10 utils and the price of eggs is $1 each, what can we say about the marginal utility of the last sausage if the price of each sausage is $2? a. It must be equel to 1 utils. B. It must be equal to 5 utills.C. It must be equal to 20 utls.D. It must be equal to 10 utls

Answer 1

option C. It must be equal to 20 utls

Step-by-step explanation:

Given:

The marginal utility of the last egg = 10 utils

Price of eggs = $1 each

Price of each sausage = $2

Now,

Total Utility is maximized when the combination of goods is

`\frac{\textup{Marginal Utility of egg}}{\textup{Price of egg }}`=
`\frac{\textup{Marginal Utility of Sausage}}{\textup{Price of Sausage }}`

or

10 ÷ 1 = Marginal Utility of Sausage ÷ 2

or

Marginal Utility of Sausage = 10 × 2 = 20 utls

Hence,

the correct answer is option C. It must be equal to 20 utls