Suppose That a Consumer Is Currently at an Optimum When

question 261

Multiple Choice

Suppose that a consumer is currently at an optimum when consuming goods A and B. Which of the following must be true?

• A) The total utility from A is equal to the total utility from B.
• B) The price of A is equal to the price of B.
• C) The marginal utility of A is equal to the marginal utility of B.
• D) The marginal utility to price ratio of A is equal to the marginal utility to price ratio of B.

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Definitions:

Marginal Product

The growth in production resulting from one more unit of input, while keeping all other inputs the same.

Total Product

The aggregate amount of goods or services generated by a business given a specific amount of resources.

Diminishing Rate

A principle stating that if one factor of production is increased while others are held constant, the incremental gains in output will eventually decrease.

Long Run

Refers to a period in economics where all factors of production can be adjusted, and all costs are variable, allowing for complete industry adjustment.