Musashi lives in Philadelphia and loves to eat desserts. He spends his entire weekly allowance on pudding and pie. A bowl of pudding is priced at $1.00, and a piece of pumpkin pie is priced at $4.00. At his current consumption point, Musashi's marginal rate of substitution (MRS) of pudding for pie is 3. This means that Musashi is willing to trade three bowls of pudding per week for one piece of pie per week. Does Larry'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?

Larry could increase his utility by buying more pudding and less pie per week.

Larry's current bundle maximizes his utility, and he should keep it unchanged.

Larry could increase his utility by buying less pudding and more pie per week.

As per the Marginal Rate of Substitution is 3. Therefore a trad-off between bowl of pumpkin pie and bowl of pudding would increase the Marginal Rate of Substitution. So therefore, Larry/Musashi should buy more pudding and less pie per week to try to achieve the equilibrium MRS.

You can calculate the Marginal Rate of Substitution by taking the derivative of the Price of the bowl of pumpkin pie and divide it by derivative of the Price of the Bowl of pudding, As in this case the answer is more the MRS that is 3 therefore to increase MRS more bowl of pudding would have to be bought.