The utility function captures
A) how consumers interact.
B) how an individual consumer ranks consumption bundles.
C) how output is produced from labor and capital inputs.
D) how happy a consumer is about a given consumption bundle.

Question

Quizplus · Accepted Answer

The utility function represents how an individual consumer ranks different consumption bundles based on their level of satisfaction or happiness. It is used in microeconomic theory to analyze consumer behavior and decision-making. A is incorrect because the interaction between consumers is not explicitly incorporated in the utility function. C describes the production function, which is used to analyze the relationship between inputs and output in the production process. D is partially correct, as the utility function does capture how satisfied a consumer is with a given consumption bundle, but it is not limited to happiness alone. Other factors such as preferences, needs, and budget constraints also play a role.

The Utility Function Captures