At the utility maximizing equilibrium for two goods, X and Y, which of the following must be TRUE?
A) The marginal utility per dollar spent on X will exceed the marginal utility per dollar spent on Y.
B) The total expenditure will be the same for each good.
C) The marginal utility per dollar from X equals the marginal utility per dollar from Y.
D) The marginal utility will be the same for each good.

Question

Quizplus · Accepted Answer

At the utility maximizing equilibrium, the consumer allocates their budget such that the marginal utility per dollar spent on each good is equal. This ensures that the last dollar spent on each good provides the same level of additional satisfaction, maximizing total utility.

At the Utility Maximizing Equilibrium for Two Goods, X and Y