The consumer's optimal choice is the one in which the marginal utility per dollar spent on good X is
A)equal to the marginal utility per dollar saved on good X.
B)greater than the marginal utility per dollar spent on good Y.
C)equal to the marginal utility per dollar spent on good Y.
D)less than the marginal utility per dollar spent on good Y.

Question

Quizplus · Accepted Answer

The consumer's optimal choice is the one in which the marginal utility per dollar spent on good X is equal to the marginal utility per dollar spent on good Y. This is because if the marginal utility per dollar spent on X is greater, the consumer should allocate more money to X until the marginal utility per dollar spent is equal to that of Y. Similarly, if the marginal utility per dollar spent on Y is greater, the consumer should allocate more money to Y until the marginal utility per dollar spent is equal to that of X. Therefore, C is the best choice.

The Consumer's Optimal Choice Is the One in Which the Marginal