For the consumer to be at an optimum, it must be the case that
A) $M R T _ { C , c ^ { \prime } } = ( 1 + r )$.
B) $M R S _ { C , c ^ { \prime } } = \frac { 1 } { ( 1 + r ) }$.
C) $M R S _ { C , c ^ { \prime } } = w e ( 1 + r )$.
D) $M R S _ { C , c ^ { \prime } } = ( 1 + r )$.
E) $M R T _ { \mathcal { C } , c ^ { \prime } } = \frac { 1 } { ( 1 + r ) }$.

Question

Quizplus · Accepted Answer

The optimum for the consumer occurs when the marginal rate of substitution between two goods is equal to the ratio of their prices (1+r in this case). Therefore, option D which states that MRSC,c' = (1+r) is the correct answer.

For the Consumer to Be at an Optimum, It Must MRTC,c′=(1+r)M R T _ { C , c ^ { \prime } } = ( 1 + r )MRTC,c′​=(1+r)

For the Consumer to Be at an Optimum, It Must $M R T _ { C , c ^ { \prime } } = ( 1 + r )$