Question

The decision-making process followed by consumers to maximize utility assumes that rev: 04_09_2018 Multiple Choice a) consumers are unable to rank their preferences. b) consumers do not know how much marginal utility they obtain from consuming additional units of various products. c) consumers behave rationally, attempting to maximize their satisfaction. d) consumers have unlimited incomes.

Answer 1

C) consumers behave rationally, attempting to maximize their satisfaction.

Step-by-step explanation:

Utility maximization is one of the most basic economic concepts and it is one of the pillars of capitalism. Resources are limited, even the richest person in the world has X amount of money, he/she cannot own all the money and other resources available. Therefore, when individuals are making choices about what products to consume;

• they will rank their preferences, e.g. if you are starving, you will first buy food before thinking about buying clothes
• they will behave rationally in order to maximize their satisfaction since they have a limited income.