In Terms of Utility Theory, "Equilibrium" in the Real World

question 152

Multiple Choice

In terms of utility theory, "equilibrium" in the real world means that

• A)households are consuming as much of every commodity as they would like
• B)households have spent their incomes in such a way that their overall satisfaction is maximized
• C)households have spent their incomes in such a way that their marginal utility is maximized
• D)households have spent their incomes in such a way that their marginal utility is zero for every product consumed
• E)households have spent their incomes in such a way that their total utility is zero

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Definitions:

Operating Efficiently

The practice of minimizing waste and maximizing resources to achieve optimal productivity and profitability in a business's operations.

Precautionary Motive

A theory explaining the demand for liquidity by individuals and firms as a safeguard against future cash needs and uncertainties.

Safety Margin

The difference between the actual value of a company's sales and the break-even sales, serving as a buffer for unexpected declines in revenue.

Financial Reserve

A portion of funds set aside by a business or organization to cover future obligations or unexpected expenses.