Question : In the cardinal utility approach, the consumer's equilibrium is achieved when:
Option 1: Total utility is maximized.
Option 2: Marginal utility is maximized.
Option 3: Marginal utility equals zero.
Option 4: Marginal utility per dollar spent is equal across all goods.
Correct Answer: Marginal utility per dollar spent is equal across all goods.
Solution : The correct answer is (d) Marginal utility per dollar spent is equal across all goods.
In the cardinal utility approach, the consumer aims to allocate their budget in a way that maximizes their total utility. The consumer achieves equilibrium by equalizing the marginal utility per dollar spent on each good. This means that the consumer should allocate their spending in such a way that the additional utility derived from the last dollar spent on each good is the same across all goods.
