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 utilites from the last units purchased of the two products are 80 and 70 units, respectively. Is she buying the utility-maximizing combination of bread & milk? How should she reallocate her expenditures between the two goods?
Simpson buys loaves of bread and quarts of milk each week at prices of $1 and 80 cents, respectively.
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