Mrs. Simpson buys loaves of bread and quarts of milk each week at prices of $1 and 80 cents, respectively. At present she is buying these products in amounts such that the marginal utilities from the last units purchased of the two products are 80 and 70 utils, respectively. Is she buying the utility-maximizing combination of bread and milk? If not, how should she reallocate her expenditures between the two goods?

Q: Which statement BEST describes the principle of diminishing marginal utility? As an individual…

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A:

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A: This will be solved through this equation: Law of Equi marginal utility MUm = MUx/Px = MUy/Py

Q: the second part of the question

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Q: Illustrate with Example: According to law of diminishing marginal utility, as you consume more and…

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