Mr.Chan has an income of $20 that he is spending on donuts andcheese in such amo

Question

Mr.Chan has an income of $20 that he is spending on donuts andcheese in such amounts that he derives 25 utils of satisfactionfrom the donuts and 25 utils of satisfaction from the cheese. ONthe basis of this information we:

A.cannot say whether or not Chan is buying donuts and cheese inquilibrium amounts.

B.can say that Chan should buy more cheese and fewer donuts.

C.can say that Chan should buy more donuts and less cheese.

D.can say that Chan is buying the utility-maximizing amountsdonuts and cheese.

A consumer who has a limited budget will maximize utility orsatisfaction when the:

A.ratios of the marginal utility of each product purchaseddivided by its price are equal.

B.total utility derived from each product purchased is thesame.

C.marginal utility of each product purchased is the same.

D.price of each product purchased is the same.

Explanation / Answer

1. D. can say that Chan is buying the utility - maximizing amountsdonuts and cheese. 2. C. marginal utility of each product purchased is the same.

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