Question : Assertion: A consumer maximizes utility by consuming goods until the marginal utility per unit of money spent is equal across all goods.
Reason: The consumer aims to allocate their budget in a way that maximizes their overall satisfaction.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion
Option 2: Both the assertion and reason are true, but the reason is not a correct explanation of the assertion.
Option 3: The assertion is true, but the reason is false.
Option 4: The assertion is false, but the reason is true.
Correct Answer: Both the assertion and reason are true, and the reason is a correct explanation of the assertion
Solution : The correct answer is (a) Option A Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
The assertion states that a consumer maximizes utility by consuming goods until the marginal utility per unit of money spent is equal across all goods. This means that the consumer allocates their budget in such a way that the additional satisfaction obtained from the last unit of money spent on each good is equal.
The reason provided states that the consumer aims to allocate their budget in a way that maximizes their overall satisfaction. This aligns with the assertion because in order to maximize satisfaction or utility, the consumer needs to balance their consumption across goods until the marginal utility per unit of money spent is equal.
Therefore, both the assertion and reason are true, and the reason provides a correct explanation of the assertion.
Question : Assertion: The concept of marginal utility is only applicable in the case of discrete goods.
Reason: Marginal utility measures the additional satisfaction obtained from consuming an additional unit of a good.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Question : Assertion: The concept of marginal utility becomes irrelevant when the consumer faces perfect competition.
Reason: In perfect competition, the consumer is a price taker and must accept the market price without considering individual preferences.
Question : Assertion: Consumer equilibrium can be achieved at a point where the consumer's budget line is steeper than any indifference curve.
Reason: This occurs when the consumer exhausts their budget on the good with the highest marginal utility.
Question : Assertion: Consumer equilibrium occurs when the consumer's budget line is tangent to the highest possible indifference curve.
Reason: At this point, the consumer is maximizing their utility within the given budget constraint.
Question : Assertion: The slope of the budget line represents the relative price of two goods in the consumer's consumption bundle.
Reason: The consumer chooses a consumption bundle where the marginal rate of substitution equals the relative price of the goods.
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