Question

LaToya is buying corn chips and soda. She has 4 bags of corn chips and 5 bottles of soda in her shopping cart. The marginal utility of the fourth bag of corn chips is​ 10, and the marginal utility of the fifth bottle of soda is also 10. Is LaToya maximizing​ utility? A. No. She is maximizing marginal utility but not total utility. B. This cannot be determined because we do not know the price of corn chips and soda and whether or not she fully spent her budget allocated to corn chips and soda. C. Yes. She is maximizing utility. D. No. She is not maximizing marginal utility.

Answer 1

Option B: This cannot be determined because we do not know the price of corn chips and soda and whether or not she fully spent her budget allocated to corn chips and soda.

Explanation:

Maximization of utility of the goods given is defined as the satisfaction or benefit La Toya derived based on the amount of money she spent on the corn chips and bottles of soda.

Now, for us to know if she is maximizing utility, we need to know the price of the goods and also if she spent all the money she allocated for the corn chips and bottle of soda. This would in turn help us to know how she spent her money and if the expenses she made was most beneficial to her.

Thus, the correct answer is Option B