Figure: Preferences and Indifference Curves Refer to the figure. According to the indifference curves for Kiwis and Nuts, which statement is TRUE? A) Indifference curve U₁ provides higher utility than indifference curve U₂. B) Bundle A is preferred to Bundle B. C) Bundle C is preferred to Bundle D. D) Bundle C is preferred to Bundle B.

Question

Quizplus · Accepted Answer

Indifference curve U2S2B2U2B0 passes through bundle C which gives higher utility than bundle D as it is on a higher indifference curve. Thus, bundle C is preferred to bundle D. However, bundle A and bundle B both lie on the same indifference curve, so they provide the same level of utility. Therefore, there is no clear preference between bundle A and bundle B.

Figure: Preferences and Indifference Curves Refer to the Figure