If callum is consuming his utility maximizing bundle and the price of one good rises, what happens to the marginal utility per dollar spent on this good (u/p), and what should callum do?

The marginal utility per dollar decreases and Callum should reduce his consumption of that good

Explanation:

The marginal utility is the utility or hapiness that an extra unit of an specific good produces to the consumer. The marginal utility per dollar is the same concept but now this incorporates the price per unit of that good. As the problem states, the mathematical formula of the marginal utility per dollar is (MU/P($)). So, if the denominator increases then the whole fraction decreases, which means that an additional unit of that good would generate less utility to Callum than before. It is unlikely that the marginal utility increases because the good is not going to change (at least the problem does not specified it) but what Callum can do is to reduce his consumption of this good.

D. countries should specialize in the production of goods for which they use fewer resources in production than their trading partners.

Explanation: