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    Utility Maximization and Consumption

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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 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 Preview

    a. Is Bridget making the utility-maximizing choice? Why or why not?
    Marginal utility of last unit of wine bottle per dollar spent=50/10=5
    Marginal utility of last unit of cheese per dollar ...

    Solution Summary

    Solution depicts the steps to determine if Bridget is maximizing total utility at the current level of consumption.

    $2.49

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