If the marginal rate of substitution of cookies for brownies equals the relative
ID: 1211084 • Letter: I
Question
If the marginal rate of substitution of cookies for brownies equals the relative price of cookies in terms of brownies when the consumer is on the budget line, the consumer:
is maximizing total utility.
may or may not be maximizing total utility.
should consume fewer cookies and more brownies to maximize total utility.
should consume more cookies and fewer brownies to maximize total utility.
A.is maximizing total utility.
B.may or may not be maximizing total utility.
C.should consume fewer cookies and more brownies to maximize total utility.
D.should consume more cookies and fewer brownies to maximize total utility.
Explanation / Answer
The correct answer is option (A).
If the marginal rate of substitution of cookies for brownies equals the relative price of cookies in terms of brownies when the consumer is on the budget line, the consumer is maximizing total utility.