For lunch, Maria eats only salads or vegetarian burgers. Her weekly food budget is $36. Each salad costs $6 and each vegetarian burger costs $3. When deciding how much of each good to buy, Maria knows that 2 salads and 4 vegetarian burgers will give her a utility of 8. Maria’s utility-maximizing point is:A. 6 salads, 1 vegetarian burgerB. 4 salads, 6 vegetarian burgersC. 3 salads, 6 vegetarian burgersD. 2 salads, 8 vegetarian burgers

1 answer

Question:

For lunch, Maria eats only salads or vegetarian burgers. Her weekly food budget is $36. Each salad costs $6 and each vegetarian burger costs $3. When deciding how much of each good to buy, Maria knows that 2 salads and 4 vegetarian burgers will give her a utility of 8. Maria’s utility-maximizing point is:A. 6 salads, 1 vegetarian burgerB. 4 salads, 6 vegetarian burgersC. 3 salads, 6 vegetarian burgersD. 2 salads, 8 vegetarian burgers

Answer:The correct answer is C.Explanation:Supposing that more is preferred to less, Maria would never choose a point where she's below her budget line. That is, Maria will spend all of her rent.Therefore we can already discard possibilities like:A. Because [tex]M=6*(6)+3*(1)=33[/tex] ⇒ $33<$36The individual is not maximizing utility is she were to choose this bundle.B. Because [tex]M=6*(4)+3*(6)=42[/tex] ⇒ $42>$36This bundle is beyond what Maria can afford.Further, assuming that Maria has convex preferences, she'll choose a point where she buys more of both goods rather than specializing in the consumption of one of them. That leaves bundle D aside over bundle C because even though both bundles satisfy her budget condition M=$36, bundle C provides more utility to Maria than bundle D for being located in a more centric solution along her budget line.

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