Lars Spends All of His Income on Pizza and Gasoline

question 27

Multiple Choice

Lars spends all of his income on pizza and gasoline. Suppose Lars is presented with two options: A and B. Option A will subsidize gasoline by decreasing its price by 50%. Option B will increase Lars's income by the cost of the subsidy in Option A. Assuming Lars is indifferent between Option A and Option B, which of the following is correct?

• A) Lars gains more utility from Option A than Option B.
• B) Lars purchases at least some pizza and at least some gasoline.
• C) Lars gains more utility from Option B than Option A.
• D) Lars must spend all of his money on gasoline.

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