A Consumer Is in Equilibrium When the

question 19

Multiple Choice

A consumer is in equilibrium when the

• A) consumer is buying any combination of goods and services on his or her budget line.
• B) consumer is buying the combination of goods and services on the budget line and on the highest attainable indifference curve.
• C) marginal rate of substitution is as small as possible.
• D) marginal rate of substitution is as large as possible.
• E) marginal rate of substitution exceeds the relative price of the two goods by as much as possible.

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Definitions:

Productive

The ability to generate a significant amount of output (goods or services) per unit of input (labor, capital, etc.).

Merchandise Balance of Trade

The difference in value between a country's merchandise exports and merchandise imports over a certain period.

Negative

In an economic context, this term often implies a deficit or a diminishing amount in financial accounts or outcomes.

Year

A period of time consisting of 365 days, or 366 in a leap year, used as a primary time unit in most calendar systems.