Question

An interior solution to a consumer's utility maximization problem implies which of the following:A. consuming optimal amounts of all goodsB. consuming a positive amount of one good and a negative amount of the other good.C. consuming less than an optimal amount of at least one good.D. consuming negative amounts of all goods.

Answer 1

The correct answer is A

Step-by-step explanation:

Interior solution is the solution or a choice which is to be made through an agent and that could be characterized as an optimum which is located or situated at the tangency of two curves on the graph.

The utility maximization of the consumer states or defines that the consumer decide or take decision to allocate the incomes so that the last dollar amount which is spent on each and every product bought yields the same amount of the additional marginal utility.

Therefore, the interior solution to the utility maximization of the consumer problem states that the consumer consuming the optimal amounts of all the goods.