Mary Granola consumes apples and uglifruits. Mary's indifference curves are kinky. When she is consuming more apples than uglifruits, she is just willing to trade 3 apples for 1 uglifruit. When she is consuming more uglifruits than apples, she is just willing to trade 4 uglifruits for 1 apple. Let P1 be the price of uglifruits and P2 the price of apples. Mary maximizes her utility subject to her budget constraint. (Hint: Sketch one of her indifference curves.)
A) When P1 > 3P2, she must consume only apples.
B) When P1 > P2, she must consume 3 times as many apples as uglifruits.
C) When 4P1 > P2, she must consume only uglifruits.
D) When P1 > P2, she must consume only apples.
E) She must consume equal numbers of both.
Correct Answer:
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