A Consumer Has Preferences Over Two Goods, X and Y

question 375

Multiple Choice

A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is greater than the slope of the budget constraint. We can conclude that the consumer

• A)is currently maximizing satisfaction subject to the budget constraint.
• B)could increase satisfaction by consuming more X and less Y.
• C)could increase satisfaction by consuming less X and more Y.
• D)could purchase more X and more Y and increase total satisfaction.

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