Charles lives in New York City and loves to eat desserts. He spends his entire weekly allowance on jello and pie. A bowl of jello is priced at $1.25, and a piece of pumpkin pie is priced at $5.00. At his current consumption point, Charles's marginal rate of substitution (MRS) of jello for pie is 3. This means that Charles is willing to trade three bowls of jello per week for one piece of pie per week. Does Charles's current bundle maximize his utility-in other words, make him as well off as possible? If not, how should he change it to maximize his utility? O Charles could increase his utility by buying more jello and less pie per week. O Charles could increase his utility by buying less jello and more pie per week. O Charles's current bundle maximizes his utility, and he should keep it unchanged.
Charles lives in New York City and loves to eat desserts. He spends his entire weekly allowance on jello and pie. A bowl of jello is priced at $1.25, and a piece of pumpkin pie is priced at $5.00. At his current consumption point, Charles's marginal rate of substitution (MRS) of jello for pie is 3. This means that Charles is willing to trade three bowls of jello per week for one piece of pie per week. Does Charles's current bundle maximize his utility-in other words, make him as well off as possible? If not, how should he change it to maximize his utility? O Charles could increase his utility by buying more jello and less pie per week. O Charles could increase his utility by buying less jello and more pie per week. O Charles's current bundle maximizes his utility, and he should keep it unchanged.
Chapter10: Consumer Choice Theory
Section: Chapter Questions
Problem 8P
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Transcribed Image Text:Charles lives in New York City and loves to eat desserts. He spends his entire weekly allowance on jello and pie. A bowl of jello is priced at $1.25, and
a piece of pumpkin pie is priced at $5.00. At his current consumption point, Charles's marginal rate of substitution (MRS) of jello for pie is 3. This
means that Charles is willing to trade three bowls of jello per week for one piece of pie per week.
Does Charles's current bundle maximize his utility-in other words, make him as well off as possible? If not, how should he change it to maximize his
utility?
Charles could increase his utility by buying more jello and less pie per week.
O Charles could increase his utility by buying less jello and more pie per week.
Charles's current bundle maximizes his utility, and he should keep it unchanged.
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