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.
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