Question：Mr Smith has a limited income which restricts the number of different goods he can buy. Which one of the following best describes the position at which Mr Smith’s utility from purchasing different goods is maximised?
　　A.Marginal utility from each good is equal
　　B.Marginal utility from each good is 0
　　C.Ratio of marginal utility to price is equal for each good
Answer：C
 
　　Rationale: Imagine you can buy a second car for $10,000 or buy a bike for $100 and they both give you the same extra utility. You wouldn't choose to buy the car as you're paying much more to achieve the same utility as you could get from buying the bike. If you get 10 times more utility for one thing compared to another you'd be prepared to pay 10 times more for it.
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