If the marginal rate of substitution of cookies for brownies equals the price of cookies in terms of brownies when the consumer is on the budget line, the consumer:
A) is maximizing total utility.
B) should consume more cookies and fewer brownies to maximize total utility.
C) should consume fewer cookies and more brownies to maximize total utility.
D) may or may not be maximizing total utility.

Question

Quizplus · Accepted Answer

The consumer is maximizing total utility when the marginal rate of substitution (MRS) equals the price ratio, as this indicates that the consumer's willingness to trade between goods matches the market's trade-off, achieving optimal consumption.

If the Marginal Rate of Substitution of Cookies for Brownies