At consumer equilibrium between goods F and C, all of the following statements is true except one.Which is the exception? A)MU_F/MU_C = P_F/P_C B)MRS = -P_F/P_C C)MRS = the absolute value of the slope of the budget line D)utility is maximized subject to the budget constraint E)P_F/P_C = TU_F/TU_C

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Quizplus · Accepted Answer

The exception is statement A, which should be corrected to read: MUSF/MUSC = PSF/PSC. The correct version of E states that the ratio of the price of F to the price of C is equal to the ratio of the total utility from consuming one more unit of F to the total utility from consuming one more unit of C (i.e., the marginal rate of substitution is equal to the ratio of the total utilities). Statements B, C, and D are all true at consumer equilibrium.

At Consumer Equilibrium Between Goods F and C, All of the Following