Let MU_A and MU_B stand for the marginal utility of goods A and B,respectively.Let P_A and P_B stand for the price of goods A and B,respectively.Which statement must hold for consumer equilibrium? A)MU_A = MU_B B)MU_A = MU_B and P_A = P_B C)MU_A/MU_B = P_B/P_A D)MU_A/MU_B = P_A/P_B E)MU_AP_A = MU_BP_B

Question

Quizplus · Accepted Answer

Consumer equilibrium occurs when the marginal utility per dollar spent on each good is equal. Therefore, the statement in choice D, which says that the ratio of the marginal utilities is equal to the ratio of the prices, must hold for consumer equilibrium.

Let MUA and MUB Stand for the Marginal Utility of Goods

Let MU_A and MU_B Stand for the Marginal Utility of Goods