A consumer has maximized her total utility (as measured in money) when, at the quantity of each good chosen
A)marginal utility is negative.
B)marginal utility divided by price is equal to 1.
C)marginal utility is greater than price.
D)marginal utility is equal to total utility.

Question

Quizplus · Accepted Answer

When a consumer has maximized total utility, the last dollar spent on each good must provide an equal amount of additional utility. This means that the marginal utility divided by price of each good should be equal to 1. If it were greater than 1, the consumer could increase total utility by purchasing more of that good. If it were less than 1, the consumer could increase total utility by purchasing less of that good and more of another good. Therefore, choice B is the correct answer.

A Consumer Has Maximized Her Total Utility (As Measured in Money)