At the optimal consumption bundle, the marginal rate of substitution of leisure for consumption is equal to
A)the real wage and the budget line is tangent to an indifference curve.
B)minus the real wage and the budget line intersects the indifference curve.
C)the real wage and the budget line intersects the indifference curve.
D)minus the real wage and the budget line is tangent to the indifference curve.
E)the real wage and on the highest possible indifference curve.

Question

Quizplus · Accepted Answer

At the optimal consumption bundle, the marginal rate of substitution (MRS) of leisure for consumption equals the real wage, and the budget line is tangent to an indifference curve, indicating that the consumer is maximizing utility given their budget constraint.

At the Optimal Consumption Bundle, the Marginal Rate of Substitution