Lahore School of Economics


There will be no effect on the budget line



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Quiz 2- Version1 (1)
There will be no effect on the budget line.

Which of the following is true about a consumer's optimum when indifference curves are concave?



  1. Both goods are consumed.

  2. No goods are consumed.

  3. Only one of the goods is consumed.

  4. It occurs at the point of tangency with the budget line.

Pencils sell for 10 cents and pens sell for 50 cents. Suppose Jack, whose preferences satisfy all of the usual assumptions, buys 5 pens and one pencil each semester. With this consumption bundle, his MRS of pencils for pens is 3. Which of the following is true?



  1. Jack could increase his utility by buying more pens and fewer pencils.


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