Question

Marge has spent her entire budget on milk and cookies. The last glass of milk provided Marge with 10 additional utils and the last cookie provided her with 25 additional utils. The price of a cookie is twice the price of a glass of milk. Assuming that diminishing marginal utility applies to both goods, marge should consume ____milk and___ cookies. 1) more; fewer2) less; more3) more; more4) less; fewer

Answer 1

2) Less; more

Step-by-step explanation:

Marge should consume more cookies and less milk.

Remember, she gains 25 additional units of satisfaction from cookies, even though the price of cookies is twice that of milk it is having more marginal utility, in the sense that; we observe 25 is more than twice greater than 10.