The utility-maximizing rule says that consumers must
A) only allocate the entire available budget.
B) only make the marginal utility per dollar the same for all goods.
C) allocate the entire available budget and make the marginal utility per dollar the same for all goods.
D) either allocate the entire available budget or make the marginal utility per dollar the same for all goods but not both.
E) None of the above answers are correct.

Question

Quizplus · Accepted Answer

The utility-maximizing rule requires consumers to allocate their entire budget in order to achieve the highest possible utility. Additionally, to maximize overall utility, consumers must make the marginal utility per dollar spent equal across all goods. This means that the last dollar spent on each good should result in the same increase in total utility. Therefore, only option C correctly captures both requirements of the utility-maximizing rule.

The Utility-Maximizing Rule Says That Consumers Must