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Using the utility maximization rule, if Vicky's marginal utility of the last orange consumed is 20 and her marginal utility of the last pineapple consumed is 80, what is the price of pineapples if the price of apples is $1 and Vicky has maximized her utility?

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Answer: $4

Explanation:

The Utility Maximization Rule posits that MUx/Px = MUy/Py,

With MUx being the marginal utility derived from good x and Px being it's price

MUy is the marginal utility of good y Py is the price of good y.

According to this rule, a consumer should spend their limited income on goods which give them the most marginal utility pee dollar.

Using the rule we can plug in figures.

Note, we will assume that they meant Apple instead of orange

MUx/Px = MUy/Py

MUx of orange =20

Px of orange = $1

MUy of Pineapple =80

Substituting them into the equation

20/1 = 80/Py

20 = 80/Py

20Py = 80

Py=$4

The price of Pineapples at which Vicky has maximized her utility is $4

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