Bridget has a limited income and consumers only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget’s utility, while the last pound of cheese added 40 units.

Question

Bridget has a limited income and consumers only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese.  The price of wine is $10 per bottle and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget’s utility, while the last pound of cheese added 40 units. 
a.	Is Bridget making the utility-maximizing choice? Why or why not?

b.	If not, what should she do instead? Why?

bobpursley · Answer

on the last, utility units/dollar wine: 50/10=5 cheese: 40/4=10 she should have traded the bottle of wine for more cheese.