The consumer's income is $800.
-According to the above figure,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

The consumer's income is $800.
-According to the above figure,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

The consumer doesn't choose the combination at point B because at that point, the rate at which the consumer is willing to trade X for Y (the marginal rate of substitution) is different from the rate at which these goods can be traded in the market (the price ratio). This means the consumer values a combination of goods differently than what the market suggests, leading to an inefficient allocation of resources for the consumer's preferences. Additionally, the marginal utility per dollar spent on Y exceeding that on X indicates that the consumer can achieve a higher level of satisfaction by reallocating spending towards Y, further explaining why point B is not chosen.

The Consumer's Income Is $800