The consumer is in equilibrium when
A) MRT = MRS.
B) / = / .
C) the budget line is tangent to the indifference curve at the bundle chosen.
D) All of the above.

Question

The consumer is in equilibrium when
A) MRT = MRS. 
B) / = / . 
C) the budget line is tangent to the indifference curve at the bundle chosen. 
D) All of the above.

Quizplus · Accepted Answer

The consumer is in equilibrium when all three conditions are met. MRT = MRS ensures that the consumer is optimizing the ratio of the two goods to maximize utility, while the budget line being tangent to the indifference curve at the chosen bundle ensures that the consumer is spending all their income and not overspending on one good. Therefore, only choice D is the correct answer.

The Consumer Is in Equilibrium When