Which of the following is not true regarding the outcome of a consumer's optimization process ?
Correct answer: E. The consumer is indifferent between any two points on his budget constraint
- A. The marginal utility per dollar spent on each good is the same
- B. The marginal rate of substitution between goods is equal to the ratio of the prices between goods
- C. The consumer's indifference curve is tangent to his budget constraint
- D. The consumer has reached his highest indifference curve subject to his budget constraint
- E. The consumer is indifferent between any two points on his budget constraint
Explanation
Points on the same indifference curve provide equal utility, but different points on a budget line generally lie on different indifference curves. The consumer is therefore not indifferent between any two points on the budget constraint.
Last updated
About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
Practise Microeconomics
1,705 free Microeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
Related questions
_____ 1954 study of U.S trade patterns showed that U.S exports were labor-intensive compared with U.S imports, even though the United States was widely regarded as a relatively capital-abundant nation ?
A attempts to limit outsourcing of jobs to foreigners by requiring that a minimum percentage of a product's value must be produced domestically if that good is to be sold in the domestic market ?
A binding price ceiling creates?
A borrower gives to creditor a security to grantee repayment of a loan. What is this security called ?
A buyer's willingness to pay is that buyer's ?