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6 August, 18:14

Martha's current marginal utility from consuming orange juice is 75 utils per ounce and her marginal utility from consuming coffee is 50 utils per ounce. If orange juice costs 25 cents per ounce and coffee costs 20 cents per ounce, is Martha maximizing her total utility from the two beverages? If so, explain how you know. If not, how should she rearrange her spending?

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  1. 6 August, 20:52
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    Martha spend more on orange juice and less on coffee

    Explanation:

    given data

    orange juice = 75 utils per ounce

    orange juice costs = 25 cents per ounce

    coffee = 50 utils per ounce

    coffee costs = 20 cents per ounce

    solution

    we get here Martha current consume cost orange and coffee both that is

    orange juice = (75 utils/ounce) : ($0.25/ounce)

    orange juice = 300 utils per dollar

    and

    coffee = (50 utils/ounce) : ($0.20 / ounce)

    coffee = 250 utils per dollar

    so we can see here both price is different

    so that here not maximizing utility.

    Martha spend more on orange juice and less on coffee
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