Use the following statements to answer this question: I. The equal marginal principle may be used to characterize the maximum utility consumption decision even if the diminishing MRS assumption does not hold.
II) The equal marginal principle implies that the MRS at the optimal consumption bundle is always equal to the price ratio.

A) I and II are true.
B) I is true and II is false.
C) II is true and I is false.
D) I and II are false.

Equal Marginal Principle

The principle stating that optimal allocation occurs when the marginal benefits from allocation of resources to different uses are equalized.

MRS

An abbreviation for Marginal Rate of Substitution, which is the rate at which a consumer is willing to exchange quantities of one good for another while maintaining the same level of utility.

Price Ratio

The proportionate comparison or ratio of the prices of two different goods or services.