If a Consumer Is Spending All of His/her Income in a Manner

question 123

Multiple Choice

If a consumer is spending all of his/her income in a manner where MU_a / P_a = MU_b / P_b, then the consumer:

• A) should increase the consumption of A and decrease the consumption of B.
• B) is maximizing his/her utility.
• C) should increase the consumption of B and decrease the consumption of A.
• D) should increase the consumption of both A and B.
• E) should decrease the purchases of both A and B.

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Definitions:

Developed Economies

Countries with highly industrialized economic systems, significant technological infrastructure, and high levels of Gross Domestic Product per capita.

World War II

A global conflict that lasted from 1939 to 1945, involving most of the world’s nations, including all of the great powers, eventually forming two opposing military alliances: the Allies and the Axis.

Productivity Growth Rate

The rate at which the output of goods and services per unit of input (such as labor) increases over a specific period.

Output Per Capita

The total value of all goods and services produced by an economy in a given period divided by the population size.