Suppose That the Ratio of Marginal Utility to Price for Good

question 64

Multiple Choice

Suppose that the ratio of marginal utility to price for good $A$ is 10 , and the ratio of marginal utility to price for good $B$ is 5 . Assume that for her current consumption of goods $A$ and $B$ the consumer is experiencing diminishing marginal utility for each good. In order for this consumer to be at her utility maximizing point, she should:

• A) consume less \(A\) and more \(B\).
• B) consume more \(A\) and less \(B\).
• C) consume more \(A\) and more \(B\).
• D) do nothing - the consumer is already in equilibrium.

---

Definitions:

Positive Economic Profits

Earnings that exceed the total costs, including both explicit and implicit costs, signalling strong market performance.

Monopolistically Competitive

Monopolistically competitive refers to a market structure where many firms sell similar but not identical products, with each firm having some degree of market power.

Short Run

A time period in which at least one factor of production is fixed, focusing on immediate effects.

Long Run

A period of time in economics where all factors of production and costs are variable, allowing full industry adjustment.