The price of a McDonalds dinner is 5 the price of a Burger K

The price of a McDonald\'s dinner is $5; the price of a Burger King dinner is $5. The marginal utility you would get from the next McDonald\'s dinner is 15; the marginal utility you would get from the next Burger King dinner is 20. You should:

A. consume more McDonald\'s dinners.

B. not consume either Burger King or McDonald\'s dinners.

C. consume more Burger King dinners.

D. realize you cannot make a rational decision.

Solution

Since the price of both the burgers are equal, the next burger that the consumer will buy can be decided on the basis of generic utility price ratio.

Generic Utility Price Ratio

For McDonald’s = Marginal Utility / Price of burger

                             = 15/5

                             = 3

For Burger King   = 20/5

                             = 4

Hence the consumer will consume more at Burger Kings Dinner (C).