A utility function is a mathematical formula that assigns to each consumption bundle a numeric value that represents the
A) Opportunity cost of consuming the bundle
B) Consumer's relative well-being from consuming the bundle
C) Price the consumer would pay for the bundle
D) Rates of substitution of the goods in the bundle

Question

Quizplus · Accepted Answer

A utility function is a mathematical representation of a consumer's preferences over different bundles of goods. It assigns a numeric value to each bundle, representing the consumer's level of satisfaction or well-being from consuming that bundle. Therefore, option B is the correct answer. Option A refers to the concept of opportunity cost, which is not directly related to utility function. Options C and D are also incorrect as they are not related to utility function.

A Utility Function Is a Mathematical Formula That Assigns to Each