-In Figure 21.4, point z is halfway on a line between the no-trade allocation at point f and the no-advantage allocation at point m. Yet point z has higher utility than the other two points. This is because of which assumption?
A) selfishness
B) convex preferences
C) increasing returns to scale

Question

-In Figure 21.4, point z is halfway on a line between the no-trade allocation at point f and the no-advantage allocation at point m. Yet point z has higher utility than the other two points. This is because of which assumption?
A) selfishness 
B) convex preferences 
C) increasing returns to scale

Quizplus · Accepted Answer

Convex preferences imply that combinations or mixtures of goods (or allocations) are preferred to extreme points, leading to higher utility for points that are averages or mixtures of other points, such as point z being between points f and m.