An optimizing consumer has to choose between two goods: Good A priced at PA and Good B priced at PB.Given that MBA is the marginal benefit from consuming Good A and MBB is the marginal benefit from consuming Good B,the consumer's well-being will be maximized at the point where ________.
A) MBA = MBB
B) MBA/PB = MBB/PA
C) MBA/PA = MBB/PB
D) MBA = MBB/PB

Question

Quizplus · Accepted Answer

In order to maximize utility, the consumer must allocate their budget in a way that the marginal benefit per unit of money spent on each good is equal. This means that the ratio of the marginal benefit of a good to its price must be equal for both goods. Therefore, the correct answer is option C, where MBA/PA = MBB/PB.

An Optimizing Consumer Has to Choose Between Two Goods: Good