-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 d,
A) the absolute value of his MRS is larger than the trade-off offered by the market.
B) he is willing to give up more chicken 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 d,
A) the absolute value of his MRS is larger than the trade-off offered by the market. 
B) he is willing to give up more chicken than he has to, given market prices. 
C) he is not maximizing his utility. 
D) All of the above.

Quizplus · Accepted Answer

At point d, Max's marginal rate of substitution (MRS) is steeper than the budget line, indicating that he values the trade-off between chicken and the other meat differently than the market does (A). This means he is willing to give up more chicken for the other meat than what the market requires (B), showing that he is not at his highest possible utility given his budget, hence not maximizing his utility (C).

-Max Has Allocated $100 Toward Meats for His Barbecue