-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)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)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 larger than the trade-off offered by the market, indicating he values chicken more compared to what the market requires him to give up, hence he is willing to give up more chicken than he has to, given market prices. This situation implies he is not at his highest possible utility level, so he is not maximizing his utility.

-Max Has Allocated $100 Toward Meats for His Barbecue