Microeconomics

7. MRS and utility maximization Eric lives in Montreal and loves to eat desserts. He spends his entire weekly allowance on yogurt and pie. A bowl of yogurt is priced at $1.75, and a piece of pecan pie is priced at $7.00. At his current consumption point, Eric's marginal rate of substitution (MRS) of yogurt for pie is 4. This means that Eric is willing to trade four bowls of yogurt per week for one piece of pie per week. Does Eric's current bundle maximize his utility-in other words, make him as well off as possible? If not, how should he change it to maximize his utility? O Eric could increase his utility by buying more yogurt and less pie per week. O Eric's current bundle maximizes his utility, and he should keep it unchanged. O Eric could increase his utility by buying less yogurt and more pie per week