Suppose you solve a consumer's constrained 2-good optimization problem for a given economic environment --- and your answer contains a negative consumption level of good 2.Which of the following is a valid conclusion on your part:
A)The true optimum has the consumer consume none of good 1.
B)The true optimum has the consumer consume none of good 2.
C)There are multiple "true" optimal consumption bundles.
D)The consumer will sell good 2.
E)None of the above.

Question

Quizplus · Accepted Answer

Consumption levels of goods cannot be negative. Therefore, the answer that makes the most sense is that the true optimum has the consumer consume none of good 2. This will ensure that consumption levels are non-negative.

Suppose You Solve a Consumer's Constrained 2-Good Optimization Problem for a Given