Bridget has a limited income and consumers only wine and cheese; her current consumption choice is four bottles of wine and 10 pounds of cheese. The price of wine is $10 per bottle and the price of cheese is $4 per pound. The last bottle of wine added 50 units to Bridget’s utility, while the last pound of cheese added 40 units.

a. Is Bridget making the utility-maximizing choice? Why or why not?

b. If not, what should she do instead? Why?

on the last, utility units/dollar

wine: 50/10=5
cheese: 40/4=10

she should have traded the bottle of wine for more cheese.

To determine if Bridget is making the utility-maximizing choice, we need to compare the marginal utility per dollar spent on wine and cheese.

First, we calculate the marginal utility per dollar for each product. Marginal utility is the additional satisfaction gained from consuming one more unit of a product.

For wine:
Marginal utility of the last bottle = 50 units
Price of wine = $10
Marginal utility per dollar for wine = Marginal utility of the last bottle / Price of wine = 50 units / $10 = 5 units per dollar

For cheese:
Marginal utility of the last pound = 40 units
Price of cheese = $4
Marginal utility per dollar for cheese = Marginal utility of the last pound / Price of cheese = 40 units / $4 = 10 units per dollar

Comparing the marginal utility per dollar spent between wine and cheese, we see that cheese provides more utility per dollar than wine. Bridget should reallocate her consumption to increase her overall utility.

To maximize her utility, Bridget should consume more cheese and less wine. By consuming more cheese, she can increase her marginal utility per dollar spent and maximize her overall satisfaction.

In summary:
a. No, Bridget is not making the utility-maximizing choice because cheese provides more utility per dollar than wine.

b. Bridget should consume more cheese and reduce her consumption of wine to maximize her utility. This will allow her to achieve the highest level of satisfaction with her limited income.