A Consumer Maximizes Total Utility from a Given Amount of Income

question 89

Multiple Choice

A consumer maximizes total utility from a given amount of income when the

• A) Marginal utility obtained from the last dollar spent on each good is the same.
• B) Marginal utility of the last unit of each good is the same.
• C) Total utility obtained from each product is the same.
• D) Amount spent for each product is the same.

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Definitions:

Regressive

Describes a tax structure where the tax rate decreases as the taxable amount increases, placing a higher relative burden on lower income earners.

Effective Average

A calculated mean intended to provide a more accurate or meaningful representation of a set of values, taking into account various factors.

Federal Taxes

Taxes collected by the national government, including income taxes and Social Security taxes.

Perfectly Elastic

Describes a situation where the quantity demanded or supplied responds infinitely or massively at a particular price level, often represented by a horizontal line on a graph.