Consumers Maximize Their Utility When

question 118

Multiple Choice

Consumers maximize their utility when:

• A) the total benefits are greater than total costs.
• B) the marginal utility per dollar is equal across all goods consumed and all income is spent.
• C) they consume the good on which they place the highest overall value.
• D) they diversify their consumption across goods.

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Definitions:

Insight

The ability to understand the inner nature of things or to gain an intuitive understanding of complex situations or problems.

Algorithm

A set of rules or a step-by-step process designed to perform a specific task or solve a particular problem.

Heuristic

A simple thinking strategy that often allows us to make judgments and solve problems efficiently; usually speedier but also more error-prone than an algorithm.

Tools

Devices or implements used to carry out a function or perform a task, often making jobs easier or possible.