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's equilibrium is achieved when marginal utility per dollar spent is equal across all goods. This means that the consumer allocates their budget in such a way that the last dollar spent on each good yields the same additional utility. This condition ensures that the consumer is maximizing their overall utility given their budget constraint.
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