a rational consumer will purchase a product whose price is?

Analyze the question: It asks about the condition under which a rational consumer decides to buy a product, in relation to price and utility.

Concept: A rational consumer wants to maximize satisfaction (utility) from limited income. Marginal utility (MU) is the extra satisfaction from consuming one more unit. The money spent on a unit is its price, which reflects the satisfaction given up elsewhere.

• If price < MU, the unit gives more satisfaction than it costs. The consumer would want to buy more of it.
• If price > MU, the unit costs more than the satisfaction it gives. The consumer would buy less.
• If price = MU, the consumer cannot gain by buying more or less. This is the point of consumer equilibrium.

Solution: The rational consumer keeps buying units while MU is higher than price. Because of diminishing marginal utility, MU falls with each extra unit. The consumer stops at the quantity where MU falls to equal the price:

MU = Price

This is where satisfaction is maximized. Buying beyond this point (price > MU) would reduce net satisfaction.

Checking the options:

• A. Price greater than MU: the consumer would lose out. Wrong.
• B. Price less than MU: the consumer would still gain from buying more, so he has not yet reached the optimum. This is not the equilibrium. Wrong.
• C. Price equal to MU: the equilibrium condition. Correct.
• D. Price equal to total utility: not a rule for consumer choice. Wrong.

Exam tip: Remember "MU = P" as the stopping rule for a rational consumer. For several goods, the rule extends to MUₐ/Pₐ = MU_b/P_b. Whenever you see "equilibrium of the consumer," think of MU equal to price.