Which of the following statements is true about the consumer's expenditure minimization problem?
A)The consumer's expenditure minimization problem results in the same optimal basket as the consumer's utility maximization problem if the required level of utility for the expenditure minimizer is the same as the maximized utility for the utility maximizer.
B)The consumer's expenditure minimization problem has an optimum at an expenditure of zero.
C)The consumer's utility maximization problem results in a tangency between the budget constraint and an indifference curve, whereas the expenditure minimization problem results in a solution where the indifference curve crosses the budget line.
D)The consumer always prefers to maximize utility rather than to minimize expenditure.

Question

Quizplus · Accepted Answer

The consumer's expenditure minimization problem and the consumer's utility maximization problem result in the same optimal basket of goods when the level of utility in the expenditure minimization problem is set to be the same as the level of utility achieved at the optimum of the utility maximization problem. This is because both problems essentially find points on the same indifference curve that are tangent to a budget constraint, albeit with different initial objectives.

Which of the Following Statements Is True About the Consumer's