The correct answer is: A. The Ratio ratio of marginal utilities of the two goods is equal to the ratio of their respective goods are equal.
An indifference curve is a graph that shows all the combinations of two goods that give a consumer the same level of satisfaction. The marginal rate of substitution (MRS) is the rate at which a consumer is willing to give up one good in exchange for another. The price line is a line that shows all the combinations of two goods that a consumer can afford given their income and the prices of the two goods.
A consumer is in equilibrium when they are maximizing their utility. This means that they are consuming the combination of goods that gives them the highest level of satisfaction. The consumer will be in equilibrium when the MRS is equal to the ratio of the prices of the two goods.
Option A is incorrect because the ratio of marginal utilities of the two goods is not equal to the ratio of their respective prices.
Option B is incorrect because the ratio of the marginal rate of utilities and prices of the respective goods is not equal to the ratio of the prices of the two goods.
Option C is correct because the marginal rate of substitution is equal to the ratio of the prices of the two goods.
Option D is incorrect because the marginal rate of substitution is decreasing.