If the marginal rate of substitution of cookies for brownies equals the relative price of cookies in terms of brownies when the consumer is on the budget line, the consumer:
A)is maximizing total utility.
B)should consume more cookies and fewer brownies to maximize total utility.
C)should consume fewer cookies and more brownies to maximize total utility.
D)may or may not be maximizing total utility.

Question

Quizplus · Accepted Answer

The fact that the marginal rate of substitution of cookies for brownies equals the relative price of cookies in terms of brownies indicates that the consumer is already at the point of utility maximization on the budget line. Therefore, the consumer does not need to change his/her consumption pattern to maximize utility, implying that the consumer is already maximizing total utility.

If the Marginal Rate of Substitution of Cookies for Brownies