Suppose You Solve a Utility Maximization Problem, and the Solution

question 105

Multiple Choice

Suppose you solve a utility maximization problem, and the solution value of the Lagrange multiplier equals zero. What does this outcome imply about the problem solution?

• A) You must have made an error while solving the problem.
• B) The budget constraint is not binding, and the constrained solution is equal to the solution to the unconstrained utility maximization problem.
• C) The optimal utility level for the consumer equals zero.
• D) The consumer's demand curve is upward sloping.

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