Answer to Question #38922 in Microeconomics for John Henson

Question

If utility is maximized subject to the budget constraint at the consumer's current bundle A:
A. every other bundle on the indifference curve that contains A is unaffordable.
B. other bundles on the indifference curve that contain A cost less than A does.
C. the marginal rate of substitution exceeds the ratio of prices at A.
D. the consumer would not prefer to have more of good X than she currently holds.

Answer 1

Utility maximization is a concept of economics. When making a purchase decision, a consumer attempts to get the greatest value possible from expenditure of least amount of money. His or her objective is to maximize the total value derived from the available money. The right answer is A, because of limited income. Moreover, it is only one point the MRS will be equal to the price ratio.