Margo Has a Monthly Income of $60 to Spend on Coffee

Multiple Choice

Margo has a monthly income of $60 to spend on coffee or bagels. Each cup of coffee costs $3 and each bagel costs $4. Margo spends all of her income, and at her consumption bundle, she is willing to forgo 1 bagel to get the next cup of coffee to achieve the same level of utility. To maximize her utility, Margo should:

A) increase coffee consumption and decrease bagel consumption.
B) increase bagel consumption and decrease coffee consumption.
C) do nothing.
D) decrease both coffee and bagel consumption.