Consuming Goods Until the Ratio of Marginal Utilities of the Goods

question 100

True/False

Consuming goods until the ratio of marginal utilities of the goods is equal to the ratio of their prices is consistent with maximizing total utility.

---

Definitions:

Excess Capacity

The situation where a company can produce more goods or services than currently demanded, indicating underutilization of resources.

Opportunity Cost

The cost of foregoing the next best alternative when making a decision or choosing one option over another.

Outlay Cost

Expenses directly associated with the production of goods or services, such as materials and labor.

Variable Selling Costs

Expenses that change in proportion to the volume of sales, such as commissions and shipping costs.