Sally Garcia Devotes All of Her Income to the Consumption

question 179

Multiple Choice

Sally Garcia devotes all of her income to the consumption of two goods, apples and Reese's Peanut Butter Cups.She has just discovered that at her current level of consumption the marginal utility of an apple is 6 and the marginal utility of a Reese's Peanut Butter Cup is 8.Suppose the price of an apple is $0.10, while the price of a Reese's Peanut Butter Cup is $0.25.To maximize her total utility, assuming that the goods are divisible, she would:

• A) consume more Reese's Butter Cups and fewer apples.
• B) consume less of both goods.
• C) consume more apples and fewer Reese's Butter Cups.
• D) there is not enough information to justify a change in her current level of consumption.

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