A consumer optimum is characterized by
A) the marginal rate of substitution of one good divided by its price equal to the marginal rate of substitution of the other good divided by its price.
B) the marginal rate of substitution equal to unity.
C) the marginal rate of substitution equal to the ratio of the prices of the two goods.
D) the marginal rate of substitution divided by the price ratio of the two goods equal to the income of the consumer.
Answer: C
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An import ban on shrimp increases the price of shrimp, decreases the quantity of shrimp, and therefore domestic producers will gain at the expense of domestic consumers.
Answer the following statement true (T) or false (F)
In which of the following conditions is the inflation rate likely to rise and the unemployment rate likely to fall?
A. stagflation B. boom C. recession D. hyperinflation
Coase made famous a court case between a doctor and a confectioner. Suppose that exact case happened again and transactions costs were absent. When would we be sure that resources were inefficiently allocated?
a. If the confectioner wins the property right to make his confections. b. If the doctor wins the right to prevent the confectioner from making his confections. c. Zoning laws are changed to prevent the confectioner from manufacturing in the current location. d. The judge forces the parties to bargain until they reach an agreement on who has a right to do what.
Economists proclaim that competitive firms make zero economic profit in the long run. This shows how
A) detached economists are from the real world. B) unrealistic economic theory is. C) firms cover all their cost, both monetary and non-monetary. D) firms cover only monetary cost when economic profits are zero.