According to the theory of utility maximization,
a. people who buy tap water apparently feel the additional benefit (compared with bottled water) offsets the additional cost
b. people who buy bottled water apparently feel the additional benefit (compared with tap water) offsets the additional cost
c. the marginal utility of the last gallon of bottled water consumed exceeds the marginal utility of the first gallon of tap water consumed
d. the marginal utility of bottled water exceeds the marginal utility of diamonds
e. bottled water must be more expensive (per gallon) than tap water
Question 2
In purchasing diamonds and water, a consumer would maximize utility by
a. dividing expenditure equally between those two goods
b. equating the marginal utilities from each of those two goods
c. equating average utility per diamond with average utility per unit of water
d. equating the total utility per diamond with the total utility per unit of water
e. equating marginal utility per dollar spent on each of those two goods
