Question:
Mrs. Wilson buys loaves of bread and quarts of milk each week at prices of $1 and 80 cents, respectively. At present she is buying these two products in amount such that the marginal utilities from the last units purchased of the two products are 80 and 70 utils, respectively. Is she buying the utility-maximizing combination of bread and milk? If not, how should she reallocate her expenditures between the two goods?