A consumer spends all of her income on goods x and y. At her optimum,
a. her valuation of the two goods exceeds the market's valuation of the two goods.
b. her marginal rate of substitution between good x and good y exceeds the ratio of the price of good x to the price of good y.
c. the slope of her budget constraint is equal to the slope of the highest indifference curve that she can reach while remaining within her budget.
d. her expenditure on good x is equal to her expenditure on good y.
c
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Market failure happens when a market does not generate the most efficient outcome
Indicate whether the statement is true or false
According to liquidity preference theory, if the quantity of money supplied is greater than the quantity demanded, then the interest rate will
a. increase and the quantity of money demanded will decrease. b. increase and the quantity of money demanded will increase. c. decrease and the quantity of money demanded will decrease. d. decrease and the quantity of money demanded will increase.
If the government runs an ad campaign to shame litterers, they are:
A. trying to get individuals to internalize the negative externality created by their decision to litter. B. using protectionist policy to help the trash-collecting industry. C. wasting a lot of money. D. All of these statements are true.
Given that price is constant, the lower the marginal utility of a good as more of the good is consumed the:
A. fewer substitutes there are. B. more you are willing to buy of it. C. more substitutes there are. D. less you are willing to buy of it.