Suppose that candies are usually sold at $0.05 each. The local candy store offers 2 extra candies for free upon purchase of any 10 pieces. Suppose that Laurel gets an allowance of $3.00 per week. Which of the following is a false statement about her budget constraint if Laurel may consume either candy, x, measured on the horizontal axis or a composite good, y, measured on the vertical axis and priced at $1.00 per unit?
A)The maximum number of candies Laurel can purchase is 72.
B)The budget constraint has horizontal segments.
C)The budget constraint is a straight line with a negative slope.
D)With normally shaped preferences, Laurel will never refuse the free candies.

Question

Quizplus · Accepted Answer

The budget constraint is not a straight line due to the offer of 2 extra candies for every 10 purchased, which introduces horizontal segments into the budget constraint, making it piecewise linear rather than a straight line.

Suppose That Candies Are Usually Sold at $0