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Wine and Cheese: Is Bridget making the utility-maximizing choice?

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Bridget has a limited income and consumes only wine and cheese, her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of the 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?

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Solution Summary

This solution provides calculations for marginal utility and discusses maximizing utility and what Bridget should do for optimal consumption.

Solution Preview

For the wine, the marginal utility is 50 units and the price is $10
Therefore, marginal utility per price = 50/10 = 5
For the cheese, the marginal utility is 40 units and the price is $4
Therefore, marginal utility ...

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