Teddy Buys Only Chocolate Chip Cookies and Hot Chocolate and Spends

Teddy buys only chocolate chip cookies and hot chocolate and spends all of his income on the two items. Suppose the price of a cookie rises. According to marginal utility theory, Teddy will buy

A) more cookies and less hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate.
B) more cookies and less hot chocolate, which increases his marginal utility from cookies and decrease his marginal utility from hot chocolate.
C) fewer cookies and more hot chocolate, which decreases his marginal utility from cookies and increases his marginal utility from hot chocolate.
D) fewer cookies and more hot chocolate, which increases his marginal utility from cookies and decreases his marginal utility from hot chocolate.

Correct Answer:

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