An Optimizing Consumer Will Select the Consumption Bundle in Which

question 139

Multiple Choice

An optimizing consumer will select the consumption bundle in which the

• A)ratio of total utilities is equal to the relative price ratio.
• B)ratio of income to price equals the marginal rate of substitution.
• C)marginal rate of substitution is equal to the relative price ratio of the goods.
• D)marginal rate of substitution is equal to marginal utility.

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Definitions:

Dividend Irrelevance

Dividend Irrelevance theory suggests that a company's dividend policy has no effect on either its value or its cost of capital, according to Modigliani and Miller.

Growth Created Value

The increase in value that a company achieves through the expansion of its operations or activities.

Future

Financial contracts obligating the buyer to purchase an asset or the seller to sell an asset, such as a physical commodity or a financial instrument, at a predetermined future date and price.

Clientele Effect

The theory that a company's stock price changes according to the demands and preferences of its existing shareholder base.