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Agriculture Economics QUESTION #11887
Question 1
Consumer equilibrium (utility maximization) is achieved where:
  • The budget constraint intersects the origin
  • The indifference curve is tangent to the budget constraint, so $MRS = \dfrac{P_x}{P_y}$✔️
  • Total utility equals total expenditure
  • Marginal utility of each good equals zero
Correct Answer Explanation
Utility maximization occurs at the tangency of the highest attainable indifference curve and the budget line, where $MRS = \dfrac{P_x}{P_y}$.