-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max is currently at point e,
A) the absolute value of his MRS is less than the trade-off offered by the market.
B) he is willing to give up more burger than he has to, given market prices.
C) he is not maximizing his utility.
D) All of the above.

Question

-Max has allocated $100 toward meats for his barbecue.His budget line and indifference map are shown in the above figure.If Max is currently at point e,
A) the absolute value of his MRS is less than the trade-off offered by the market. 
B) he is willing to give up more burger than he has to, given market prices. 
C) he is not maximizing his utility. 
D) All of the above.

Quizplus · Accepted Answer

At point e, Max is not at the point where his budget line is tangent to an indifference curve, indicating that he could achieve a higher level of satisfaction by adjusting his consumption bundle. This means he is willing to give up more of one good than necessary (burger in this case), given the market prices, and the absolute value of his Marginal Rate of Substitution (MRS) is indeed less than the trade-off offered by the market, showing he is not maximizing his utility.

-Max Has Allocated $100 Toward Meats for His Barbecue