Joan has a monthly income of €100 that she allocates to two goods: meat and potatoes. Suppose meat costs €4 per pound and potatoes €2 per pound. Suppose also that her utility function is given by the equation U (M, P) = 2M + P. An outbreak of potato rot raises the price of potatoes to €4 per pound. What combination of meat and potatoes maximizes her utility?     A. M = 25, P = 0   B. M = 20; P = 30   C. M = 20; P = 10   D. Any combination of meat and potatoes that satisfies her budget constraint

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Joan has a monthly income of €100 that she allocates to two goods: meat and potatoes. Suppose meat costs €4 per pound and potatoes €2 per pound. Suppose also that her utility function is given by the equation U (M, P) = 2M + P.

An outbreak of potato rot raises the price of potatoes to €4 per pound. What combination of meat and potatoes maximizes her utility?

 

  A.

M = 25, P = 0

  B.

M = 20; P = 30

  C.

M = 20; P = 10

  D.

Any combination of meat and potatoes that satisfies her budget constraint

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