A Consumer Is Maximizing Utility When

question 382

Multiple Choice

A consumer is maximizing utility when

• A) the slope of the budget constraint has reached -1.
• B) diminishing marginal utility has set in.
• C) the slope of the budget constraint equals the marginal rate of substitution.
• D) the consumer has spent all of his income.

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Definitions:

Compounded Semi-Annually

Interest calculated on the principal and previously earned interest twice a year.

Quarterly Compounded

An interest calculation method where interest is added to the principal every quarter, increasing the amount of interest earned or paid.

Nominal Rate

Nominal Rate refers to the interest rate before adjustments for inflation or other factors. It is the rate quoted on loans and savings without taking into account the real purchasing power of the money.

GIC

Guaranteed Investment Certificate, a Canadian investment that offers a guaranteed rate of return over a fixed period.