Refer to the following figure:

The consumer's income is $800.
-Why doesn't the consumer choose the combination at point B?
A) The consumer is willing to give up more X for additional units of Y than the rate in the market.
B) The marginal utility of Y exceeds the marginal utility of X.
C) The marginal utility per dollar spent on Y exceeds the marginal utility per dollar spent on X.
D) both a and c
E) both b and c

Question

Refer to the following figure:
  
The consumer's income is $800.
-Why doesn't the consumer choose the combination at point B?
A) The consumer is willing to give up more X for additional units of Y than the rate in the market. 
B) The marginal utility of Y exceeds the marginal utility of X. 
C) The marginal utility per dollar spent on Y exceeds the marginal utility per dollar spent on X. 
D) both a and c 
E) both b and c

Quizplus · Accepted Answer

At point B, the consumer is consuming a combination where the slope of the budget line is steeper than the slope of the indifference curve, indicating that the consumer is willing to give up more X for additional units of Y than the rate in the market (a). Additionally, at point B, the marginal utility per dollar spent on Y is higher than the marginal utility per dollar spent on X, indicating that the consumer can gain more satisfaction by spending an additional dollar on Y instead of X (c). Therefore, both option a and c are true, making option D the correct choice.

Refer to the Following Figure