Answer:
See answer below.
Step-by-step explanation:
The maximum utility theory states that more money should be allocated to resources that offer the highest utility per dollar spent.
In order to solve this question, we will calculate the utility per dollar as follows;
Utility per dollar = marginal utility / price
For bread:
Utility per dollar = 80/1 = 80
For milk:
Utility per dollar = 70/0.8 = 87.5
From the calculations above, we can see that more utility is gotten from the purchase of milk.
Therefore she is not buying the utility-maximizing combination of bread and milk, and more money should be spent on the purchase of milk.