-Refer to the budget line shown in the diagram above. At point U, __________.
A) P1/P2 = MU1/MU2
B) pizza is an inferior product
C) P2/P1 = MU2/MU1
D) roses are an inferior product

Question

-Refer to the budget line shown in the diagram above. At point U, __________.
A) P1/P2 = MU1/MU2 
B) pizza is an inferior product 
C) P2/P1 = MU2/MU1 
D) roses are an inferior product

Quizplus · Accepted Answer

At point U on the budget line, the consumer is maximizing utility, which occurs when the ratio of the prices (P1/P2) equals the ratio of the marginal utilities (MU1/MU2).

-Refer to the Budget Line Shown in the Diagram Above