Question

Suppose you are consuming two goods, a and b. Your marginal utility from good a is 20 while your marginal utility from good b is 4. In addition, good a costs 10 each and good b costs2 each. What is the marginal utility per dollar spent on good a?

1) 2
2) 4
3) 6
4) 8

Answer 1

The marginal utility per dollar spent on good a is 2.

Step-by-step explanation:

To find the marginal utility per dollar spent on good a, we need to divide the marginal utility from good a by the cost of good a. In this case, the marginal utility from good a is 20 and the cost of good a is $10. So, the marginal utility per dollar spent on good a is 20/10 = 2.