The ratio of the prices of two goods is equal to the ratio of the marginal utilities of the two goods at:
A)the vertical intercept of the budget line.
B)the optimal consumption bundle.
C)the horizontal intercept of the budget line.
D)the intersection of the budget line with the highest indifference curve.

Question

Quizplus · Accepted Answer

The marginal utility per dollar spent on each good is equal at the optimal consumption bundle. This means that the ratio of the marginal utilities of the two goods is equal to the ratio of their prices at this point.

The Ratio of the Prices of Two Goods Is Equal