Answer:
Miles is not maximizing his total utility.
Explanation:
Miles consumes pizza and ice cream.
The price of a pizza is $8, and the price of a pint of ice cream is $5.
Marginal utility from a pizza is 10 utils, and marginal utility from a pint of ice cream is 16 utils.
The total utility will be maximized when the ratio of marginal utility and price for both the goods are equal.
[tex]\frac{MU\ Pizza}{P\ Pizza}[/tex]
= [tex]\frac{10}{8}[/tex]
= 1.25
[tex]\frac{MU\ Ice\ cream}{P\ Ice\ cream}[/tex]
= [tex]\frac{16}{5}[/tex]
= 3.2
The ratio is not equal which implies that utility is not being maximized. In order to maximize total utility Miles should shift consumption from ice cream to pizza.
