Question

If an individual only consumes goods X and Y and is currently maximizing her total​ benefits, which of the following must be​ true?

A. The​ "equal bang for the​ buck" rule is adhered to.

B. MB Subscript Upper X divided by Upper P Subscript Upper X equals MB Subscript Upper Y divided by Upper P Subscript Upper YMBX/PX = MBY/PY.

C. The marginal benefits per dollar spent are the same for both goods. D. No other consumption choice can make total benefits greater.

E. All of the above.

Answer 1

Answer: E

All of the options are true.

A) This is the equal marginal utility per price rule. Marginal utility is difference of total utility between the two consecutive units.

B) This is the mathematical expression of the above rule; here the marginal utility is termed as marginal benefit: (MBx / Px) = (MBy / Py). Price of x is Px, the price of y is Py.

C) This is the theoretical approach of the above rule.

D) Since this is the scenario of maximizing benefit, no other choice could be better.

E) Therefore, all the options become true.