At a consumer optimum involving goods A and​ B, the marginal utility of good A is five times the marginal utility of good B.

Question

Part 2
The price of good B is ​$2.50
.
The price of good A is
Part 3
A.
​$12.50
.
B.
​$5
.00.
C.
​$10.00

Answer 1

To determine the price of good A, we need to compare the marginal utilities and prices of both goods A and B.

Given that the marginal utility of good A is five times the marginal utility of good B, and the price of good B is $2.50, we can set up the following equation:

Marginal utility of A = 5 * Marginal utility of B

Since the price of good B is $2.50, we can assume that the marginal utility of B is equal to $2.50.

Therefore, the marginal utility of A would be:

Marginal utility of A = 5 * $2.50 = $12.50

Thus, the price of good A is $12.50.

Answer: A. $12.50