If the Combination of Two Goods Occurs at a Point

question 296

Multiple Choice

If the combination of two goods occurs at a point of tangency between the budget line and an indifference curve, then:

• A)consumer equilibrium has not been achieved.
• B)all available income has been spent and total utility is maximized.
• C)total utility can be increased by consuming less of both goods.D.total utility can be decreased by consuming more of both goods.

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Definitions:

Perfect Competitor

An ideal market condition where numerous small firms compete against each other, and goods are sold at their marginal cost.

Long Run

A period in economic theory where all factors of production and costs are variable, allowing companies to adjust to market conditions fully.

Perfect Competitor

A theoretical market structure where many firms sell an identical product, entry and exit from the market are easy, and no single seller can influence the market price.

Long Run

A period of time in which all factors of production and costs are variable, and companies can adjust all inputs.