Answer:
Stella should consume less of milk and more of cookies to maximize total utility.
Explanation:
The price of cookies is $9, and the price of milk is $3.
Stella consumes 10 cookies and 5 cartons of milk.
The marginal utility of 10th cookie is 50 utils and the marginal utility of 5th carton of milk is 25 utils.
Her total utility will be maximized if the ratio of marginal utility and price will be equal for both cookies and milk.
Ratio for cookies
= [tex]\frac{MUx}{Px}[/tex]
= [tex]\frac{50}{9}[/tex]
= 5.55
Ratio for milk
= [tex]\frac{MUy}{Py}[/tex]
= [tex]\frac{25}{3}[/tex]
= 8.33
Since the ratio is higher for milk, it means that Stella should consume less of milk and more of cookies to maximize total utility.
