When a Consumer's Optimal Consumption Choice Is a Corner Equilibrium

question 72

Multiple Choice

When a consumer's optimal consumption choice is a corner equilibrium it implies:

• A)the consumer has highly diversified preferences.
• B)the goods are economic "neuters".
• C)consumers spend all of their income on one good.
• D)the goods are pure complements.

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Definitions:

Strip Bond

A bond where both the principal and regular coupon payments have been separated and are sold individually as zero-coupon bonds.

Compounded Semiannually

Refers to the process where interest on a deposit or loan is calculated and added to the account balance twice a year.

Maturity Date

The date on which the principal amount of a loan, bond, or other financial instrument is due to be paid in full.

Yield

The income return on an investment, such as the interest or dividends received from holding a particular security.