Suppose Carlos has to choose between purchasing jewelry and water. Which of the following is the utility-maximizing rule that Carlos should follow while choosing the optimal quantities of these two goods? (Note: In the answer options that follow, MU stands for "marginal utility.") O (MU of Water) x (Price of Water) = (MU of Jewelry) x (Price of Jewelry) O MU of Water MU of Jewelry MU of Water MU of Jewelry %3D Price of Jewelry Price of Water MU of Water MU of Jewelry %3D Price of Water Price of Jewelry Since water costs little and jewelry is expensive, it must follow that when people choose their optimal quantities of water and jewelry to purchase, the marginal utility they receive from the last piece of jewelry they buy is than the marginal utility they receive from the last gallon of water they buy.
Suppose Carlos has to choose between purchasing jewelry and water. Which of the following is the utility-maximizing rule that Carlos should follow while choosing the optimal quantities of these two goods? (Note: In the answer options that follow, MU stands for "marginal utility.") O (MU of Water) x (Price of Water) = (MU of Jewelry) x (Price of Jewelry) O MU of Water MU of Jewelry MU of Water MU of Jewelry %3D Price of Jewelry Price of Water MU of Water MU of Jewelry %3D Price of Water Price of Jewelry Since water costs little and jewelry is expensive, it must follow that when people choose their optimal quantities of water and jewelry to purchase, the marginal utility they receive from the last piece of jewelry they buy is than the marginal utility they receive from the last gallon of water they buy.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose Carlos has to choose between purchasing jewelry and water.
Which of the following is the utility-maximizing rule that Carlos should follow while choosing the optimal quantities of these two goods? (Note: In the
answer options that follow, MU stands for "marginal utility.")
O (MU of Water) x (Price of Water) = (MU of Jewelry) x (Price of Jewelry)
O MU of Water = MU of Jewelry
MU of Jewelry
%3D
Price of Water
MU of Water
Price of Jewelry
MU of Jewelry
Price of Jewelry
MU of Water
%3D
Price of Water
Since water costs little and jewelry is expensive, it must follow that when people choose their optimal quantities of water and jewelry to purchase, the
marginal utility they receive from the last piece of jewelry they buy is
than the marginal utility they receive from the last gallon of water
they buy.
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