Which of the following statements is (are) true?
A) Consumers are constrained by a budget.
B) If a consumer decides to spend more on one good, he or she must decide to spend less on another good to satisfy the budget constraint.
C) The marginal decision rule states that an activity should be expanded if its marginal benefit exceeds its marginal cost.
D) All of the above statements are true.

Question

Quizplus · Accepted Answer

All three statements are true. Consumers are indeed constrained by a budget, which means that they cannot spend more money than they have available. If a consumer wants to spend more on one good, he or she would have to spend less on another good to satisfy the budget constraint. Lastly, the marginal decision rule is a fundamental concept in economics which states that an activity or investment should be expanded if its marginal benefit exceeds its marginal cost.

Which of the Following Statements Is (Are) True