ECONOMICS (CBSE/UGC NET)

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ECONOMICS

COST BENEFIT ANALYSIS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Assume the price of a candy bar is $2 and the price of a bag of chips is $3. Assume Lilly’s marginal utility from consuming an additional candy bar is 10 utils and her marginal utility from consuming an additional bag of chips is 12 utils. If Lilly is spending her fixed weekly allowance on candy bars and bags of chips, which of the following actions will maximize Lilly’s total utility?
A
Buying more candy bars and bags of chips
B
Buying more candy bars and fewer bags of chips
C
Buying fewer candy bars and more bags of chips
D
Buying fewer candy bars and bags of chips
E
Buying the same number of candy bars and bags of chips
Explanation: 

Detailed explanation-1: -Utility measures the satisfaction an individual receives from the consumption of a good or service. Total utility measures the total satisfaction from a specific quantity of goods or services.

Detailed explanation-2: -Total utility is the total satisfaction received from consuming a given total quantity of a good or service, while marginal utility is the satisfaction gained from consuming another quantity of a good or service.

Detailed explanation-3: -In economics, the term utility refers to the happiness, benefit or value a consumer gets from a good or service.

Detailed explanation-4: -Consumer choice theory is based on the assumption that the consumer fully understands his or her own preferences, allowing for a simple but accurate comparison between any two bundles of good presented.

There is 1 question to complete.
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