The consumer chooses the bundle of goods that maximizes his utility and spends all his income.Which of the following statements is correct?
A)The marginal utilities of all goods are equal.
B)Expenditures on all goods are equal.
C)The addition to utility of the last unit of the good is equal across all goods.
D)The addition to utility of the last unit of the good per dollar spent on the good is equal across all goods.

Question

Quizplus · Accepted Answer

If the consumer is spending all of his income to maximize utility, then it must be the case that the marginal utility per dollar spent on each good is equal. This means that the addition to utility of the last unit of the good per dollar spent on the good is equal across all goods. Hence, choice D is correct. Choices A and C are not necessarily true, and choice B is unlikely if the goods do not have the same price.

The Consumer Chooses the Bundle of Goods That Maximizes His