Assume that an individual has convex indifference curves (i.e. diminishing MRS). Suppose the individual has $3 to spend on good #1 and good #2. In addition, suppose we know that at the bundle where q1=1 and q2=1, the marginal utility of good #1 is 2 utils and the marginal utility of good #2 is 1 util. Given this information, which set of prices would this individual prefer to face?A. p1=1 and p2=2B. p1=2 and p2=1C. p1=2 and p2=2

An indifference curve illustrates the combinations of two goods that will give the same amount of…

Answered: Assume that an individual has convex…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume that an individual has convex indifference curves (i.e. diminishing MRS). Suppose the individual has $3 to spend on good #1 and good #2. In addition, suppose we know that at the bundle where q₁=1 and q₂=1, the marginal utility of good #1 is 2 utils and the marginal utility of good #2 is 1 util. Given this information, which set of prices would this individual prefer to face?

A. p₁=1 and p₂=2

B. p₁=2 and p₂=1

C. p₁=2 and p₂=2

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