If the optimal consumption bundle occurs at the corner of the feasible set, the agent most likely has
A) convex preferences
B) nonconvex preferences
C) nonstrictly convex preferences

Question

Quizplus · Accepted Answer

When the optimal consumption bundle occurs at the corner of the feasible set, it suggests that the agent has nonconvex preferences. This is because convex preferences typically result in an optimal bundle that lies along the indifference curve touching the budget constraint, not at a corner. Nonconvex preferences can lead to corner solutions where the optimal choice is at the extreme end of the feasible set.

If the Optimal Consumption Bundle Occurs at the Corner of the Feasible