Utility maximization for all goods requires that:
A) the marginal utilities of all goods consumed divided by their prices are equal to the budget constraint.
B) the marginal utilities of all goods exceed the total utility of all goods.
C) the marginal utilities of all goods divided by their respective prices are equal.
D) all of the above be true.

Question

Quizplus · Accepted Answer

Utility maximization requires that the consumer allocates their budget in a way that the marginal utility per dollar spent on each good is equal among all goods. This means that the ratio of the marginal utility to the price of each good must be equal to the ratio of the marginal utility to the price of every other good. Therefore, option C is the correct answer. Option A is incorrect because it refers to a specific case and does not reflect the general concept of utility maximization. Option B is incorrect as the marginal utility should always be less than the total utility, and this condition does not necessarily lead to utility maximization. Option D is incorrect because not all choices are correct.

Utility Maximization for All Goods Requires That