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Figure: Consumer Equilibrium IV
-(Figure: Consumer Equilibrium IV) Look at the figure Consumer Equilibrium IV. Assume that you are consuming the combination of goods at point I. Given the budget constraint FL, utility:
A) cannot be increased.
B) can be increased by consuming more nights in a hotel room and fewer train tickets.
C) can be increased by consuming fewer nights in a hotel room and more train tickets.
D) can be increased by consuming more of both goods.

Question

Use the following to answer questions:
Figure: Consumer Equilibrium IV 
-(Figure: Consumer Equilibrium IV) Look at the figure Consumer Equilibrium IV. Assume that you are consuming the combination of goods at point I. Given the budget constraint FL, utility:
A) cannot be increased. 
B) can be increased by consuming more nights in a hotel room and fewer train tickets. 
C) can be increased by consuming fewer nights in a hotel room and more train tickets. 
D) can be increased by consuming more of both goods.

Quizplus · Accepted Answer

At point I, the consumer is not on the highest attainable indifference curve given the budget constraint. Therefore, utility can be increased by consuming more of both goods.

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