For an individual consumer, a corner solution may be optimal such that MRS and MRT are not equal,
A) but this is not possible in an Edgeworth Box due to the transitivity of preferences.
B) but this is not possible in an Edgeworth Box because price ratios must be positive.
C) and this may also occur in an Edgeworth Box.
D) and this may only occur in an Edgeworth Box under the perfect complements case.

Question

Quizplus · Accepted Answer

A corner solution where MRS and MRT are not equal can occur for an individual consumer, and it is also possible in an Edgeworth Box as well. It is not limited to the perfect complements case and does not violate the requirement for positive price ratios. The transitivity of preferences also does not preclude the possibility of a corner solution.

For an Individual Consumer, a Corner Solution May Be Optimal