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28 April, 00:13

In choosing between two products, a rational consumer will choose the product that gives her the: a. lowest cost per additional unit of utility. b. greatest total utility regardless of cost. c. least marginal utility per dollar. d. highest cost per additional unit of utility.

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  1. 28 April, 03:34
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    a. lowest cost per additional unit of utility.

    Explanation:

    A rational consumer tends to maximise utility with regards to per unit cost paid. Minimising 'Cost per additional utility' is also conceptually analogous to it.

    Utility maximisation regardless of cost is an incomplete statement, as cost is also a determining factor. Least Marginal Utility per dollar, highest cost per additional unit of dollar : are completely opposite to a rational consumer's choice tendencies.

    Example : A consumer consuming two goods (X, Y) get maximum utility where - his/her Marginal Utilities per unit of price paid per good equate. MUx / Px = MUy / Py
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