ECON 3118 Study Guide - Final Guide: Engel Curve, Budget Constraint, Indifference Curve

To maximize​ utility, consumers choose a consumption bundle:

A. where the slope of the budget constraint is equal to the ratio of the good price on the horizontal axis divided by the price of the good on the vert axis (multiplied by minus one).

B. on the highest indifference curve given the budget constraint.

C. where indifference curves intersect one another. 

D. where the marginal utility of each product is maximized. 

E. where the slope of the highest indifference curve is equal to the marginal rate of substitution

11) Which one of the following is true at the best affordable choice of a consumer? A) Marginal rate of substitution is less than the relative price of the good measured on the r-axis. B) Other consumption points along the consumer's budget line lie on higher indifference curves. C) Marginal rate of substitution exceeds the slope of the budget line. D) The consumption choice is outside the budget line. E) All income is spent.

24) Which one of the following is true at the best affordable choice of a consumer? A) Marginal rate of substitution exceeds the slope of the budget line. B) Marginal rate of substitution is less than the relative price of the good measured on the X-axis. C) All income is spent. D) The consumption choice is outside the budget line. E) Other consumption points along the consumer's budget line lie on higher indifference curves.