When Chris maximizes his total utility,then his entire available budget is allocated in such a way that the
A) marginal utility of all goods is equal.
B) marginal utility per dollar is equal for all goods.
C) marginal utility is as large as possible for goods.
D) marginal utility will start decreasing if it consumes fewer goods.
E) quantities consumed of each good are equal.

Question

Quizplus · Accepted Answer

Maximizing total utility requires allocating the entire budget in a way that the marginal utility per dollar is equal for all goods. This is because any additional spending on a good should result in a marginal utility per dollar that is equal to the marginal utility per dollar of the other goods. Otherwise, Chris can increase his total utility by shifting spending towards goods with higher marginal utility per dollar.

When Chris Maximizes His Total Utility,then His Entire Available Budget