The utility-maximizing rule says that consumers must
A) only allocate the entire available budget.
B) only make the marginal utility per dollar the same for all goods.
C) allocate the entire available budget and make the marginal utility per dollar the same for all goods.
D) either allocate the entire available budget or make the marginal utility per dollar the same for all goods, but not both.
E) None of the above answers is correct.

Question

Quizplus · Accepted Answer

The utility-maximizing rule states that consumers must allocate their entire available budget in such a way that the marginal utility per dollar spent is the same for all goods. This rule ensures that consumers achieve the highest possible level of utility (satisfaction) given their limited budget. Therefore, only option C correctly captures the two elements of the utility-maximizing rule.

The Utility-Maximizing Rule Says That Consumers Must