Question

The price of gasoline is $1 per gallon and the price of a hamburger is $4. If you currently receive marginal utility of 5 from gasoline and marginal utility of 8 from a hamburger, you should buy less gasoline and more hamburgers.

a. True
b. False

Answer 1

false

Step-by-step explanation:

Marginal utility is the additional utility derived from consuming one more unit of a good

the consumption decision is to consume more units of a good that gives the higher utility per good.

Marginal utility per good = marginal utility / price of the good

gasoline = 5 / 1 = 5

hamburger = 8/4 = 2

gasoline gives a higher utility per good. Thus, more of gasoline should be purchased