Use the following for questions 61-69.

-(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $1 per unit and the price of good Y is $2 per unit, and you consume 4 units of good X and 2 units of good Y.To maximize utility, assuming that the goods are divisible, you would consume:
A) less of both X and Y.
B) more of both X and Y.
C) less of X and more of Y.
D) more of X and less of Y.

Question

Use the following for questions 61-69.
  
-(Exhibit: Consumer Equilibrium 1) Assume that the price of good X is $1 per unit and the price of good Y is $2 per unit, and you consume 4 units of good X and 2 units of good Y.To maximize utility, assuming that the goods are divisible, you would consume:
A) less of both X and Y. 
B) more of both X and Y. 
C) less of X and more of Y. 
D) more of X and less of Y.

Quizplus · Accepted Answer

According to the graph, the consumer equilibrium is at point A, where the indifference curve is tangent to the budget constraint. At this point, the marginal utility per dollar spent on X is equal to the marginal utility per dollar spent on Y. Therefore, the consumer should consume more of X and less of Y (i.e. move upward along the Y-axis and downward along the X-axis) to reach the equilibrium point.

Use the Following for Questions 61-69