Amy lives in Detroit and loves to eat desserts. She spends her entire weekly allowance on yogurt and pie. A bowl of yogurt is priced at $1.75, and a piece of pumpkin pie is priced at $7.00. At her...

Amy lives in Detroit and loves to eat desserts. She spends her entire weekly allowance on yogurt and pie. A bowl of yogurt is priced at $1.75, and a piece of pumpkin pie is priced at $7.00. At her current consumption point, Amy's marginal rate of substitution (MRS) of yogurt for pie is 5. This means that Amy is willing to trade five bowls of yogurt per week for one piece of pie per week.

Does Amy's current bundle maximize her utility—in other words, make her as well off as possible? If not, how should she change it to maximize her utility?

A. Amy's current bundle maximizes her utility, and she should keep it unchanged.

B. Amy could increase her utility by buying more yogurt and less pie per week.

C. Amy could increase her utility by buying less yogurt and more pie per week.

Jun 09, 2022

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Amy lives in Detroit and loves to eat desserts. She spends her entire weekly allowance on yogurt and pie. A bowl of yogurt is priced at $1.75, and a piece of pumpkin pie is priced at $7.00. At her...

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