Suppose a Consumer Buys Two Goods $x$ And $y$ And Has Income Of

question 71

Multiple Choice

Suppose a consumer buys two goods, $x$ and $y$ and has income of $\$ 30$ . Initially $P _ { x } = 3$ and $P _ { y } = 3$ and the consumer chooses basket $A$ with $x = 7$ and $y = 3$ . The prices change to $P _ { x } = 4$ and $P _ { y } = 2$ and the consumer chooses basket $B$ with $x = 5$ and $y = 5$ .

• A) These choices are consistent with utility maximization.
• B) These choices are not consistent with utility maximization.
• C) With this information it is not possible to determine if these choices are consistent with utility maximization.
• D) Basket B must be preferred to basket A.

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Recognize the factors affecting the cost of home insurance.