A utility-maximizing consumer will choose a collection of goods
A)represented by a point below her budget line
B)represented by a point above her budget line
C)for which the marginal utility from each good is the same
D)for which the marginal utility divided by the price is the same or each good
E)for which the total utility from each good is the same

Question

Quizplus · Accepted Answer

A utility-maximizing consumer will choose a collection of goods for which the marginal utility divided by the price is the same for each good. This is because the consumer will want to allocate their budget in a way that maximizes their utility per dollar spent. Therefore, they will continue to purchase goods until the marginal utility per dollar spent is equal across all goods. This is known as the principle of equal marginal utility per dollar spent.

A Utility-Maximizing Consumer Will Choose a Collection of Goods