Consider the utility function U(x))-min (5x,). Which of the following statements
ID: 1150226 • Letter: C
Question
Consider the utility function U(x))-min (5x,). Which of the following statements is TRUE? a. If you consume 1 additional unit of x, you need to decrease your consumption of y by 7/5 6. units to remain as well off. The MRS of x for y is 5/7 You derive no additional utility from an additional unit of x unless it comes with an additional 7/5 units ofy. b. c. d. Your indifference curves are L-shaped, and the equation of a line from the origin througlh the vertices of all indifference curves can be represented as y (5/7)x. All of the above statements are false. e.Explanation / Answer
(d) Your indifference curves are L-shaped and the equation of a line from the origin through the vertices of all indifference curves can be represented as when (5x) = (7y) i.e y= 5/7 x.
Because MRS is equal to 0 along the horizontal line and infinity along the vertical line. And utility can only be increased by increasing the consumption of both goods.
Hence, option(d) is correct.