The Relative Price Rule Says That at the Optimal Consumption

question 67

Multiple Choice

The relative price rule says that at the optimal consumption bundle the marginal rate of substitution between two goods must be equal to their relative price. This is equivalent to saying that:

• A) the marginal utility per dollar is the same for both goods.
• B) the marginal utility of each good consumed must be the same.
• C) goods should be consumed in the same ratio as their relative price.
• D) the marginal rate of substitution is not equal to the ratio of marginal utilities.

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Definitions:

Kinetic Balance

The dynamic equilibrium of forces acting on a body, ensuring stability and efficiency in movement.

Vestibular Membrane

Membrane separating the cochlear duct and the scala vestibuli.

Auditory Ossicles

The three small bones located in the middle ear, known as the malleus, incus, and stapes, that transmit sound vibrations to the inner ear.

Basilar Membrane

A membrane in the cochlea of the inner ear that plays a crucial role in sound vibration analysis and auditory processing.