Answered: A consumer chooses an optimal…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter6: Consumer Choice And Demand

Section: Chapter Questions

Problem 6QFR

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A consumer chooses an optimal consumption point where the Group of answer choices marginal rate of substitution equals the relative price ratio. slope of the indifference curve exceeds the slope of the budget constraint. ratios of all the marginal utilities are equal. All of the above are correct.

### Optimal Consumption Point

A consumer chooses an optimal consumption point where the:

- **Marginal rate of substitution equals the relative price ratio.**
- This condition indicates that the consumer has balanced the trade-offs between different goods such that the rate at which they are willing to substitute one good for another (while maintaining the same level of utility) is equal to the ratio of the prices of the two goods. This ensures the consumer is maximizing their utility given their budget constraint.

- Slope of the indifference curve exceeds the slope of the budget constraint.
- This condition states that the consumer would prefer to increase their consumption of one good over another, but this is typically not true at the optimal consumption point where equilibrium occurs.

- Ratios of all the marginal utilities are equal.
- This statement suggests that the marginal utility per unit of cost is identical across all goods consumed. However, the optimal consumption point is generally reached when the marginal utility per dollar spent on each good is equal.

- All of the above are correct.
- This option would indicate that multiple conditions might hold simultaneously, but this is typically not the primary characteristic of the optimal consumption point.

In conclusion, the correct answer is that the *marginal rate of substitution equals the relative price ratio,* indicated by the first option.

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