15. cole is about to purchase 4 units of good a and 6 units of good b. the price of both a and b is $2. cole has only $20 to spend. assume that the marginal utility of the fourth unit of a is 8 and the marginal utility of the sixth unit of b is12. if cole wants to maximize utility
[a] he should buy more of a and less of b.
[b] from the information given, it is impossible to determine whether or not cole is maximizing utility.
[c] he should buy less of a and more of b.
[d] he should not buy anything.
[e] he should buy a and b in the quantities indicated.

Option (A) is correct.

Explanation:

Price of good A = Price of Good B = $2

Income = $20

Therefore, from the above information, the budget constraint is as follows:

2A + 2B = 20

Both goods have an intercept value of 10 with A=4 & B=6 and the slope of indifference curve shows that marginal rate of substitution (MRS) is falling. This means that as we consume more and more units of a good, the utility obtained from that good decreases.

The utility derived from good B decreases as we consume more and more units of a good, since it is in larger proximity to the intercepts value.

Therefore, the consumer will pay to purchase more of good A as compared to good B at this point.

answer; planning;

answer the amount a seller is paid minus the cost of production;