The firm manager with indifference curves which are convex from the origin (output on the horizontal axis and profit on the vertical axis) views:
A) only profits to be "goods."
B) only outputs to be "goods."
C) both profits and outputs to be "goods."
D) None of the statements is correct.

Question

Quizplus · Accepted Answer

The convexity of the indifference curves from the origin implies that the firm manager prefers both higher levels of output and higher levels of profit. This is because the shape of the indifference curves indicates that the firm manager is willing to give up some profit in exchange for more output, and vice versa. Hence, both outputs and profits are viewed as "goods" by the firm manager.

The Firm Manager with Indifference Curves Which Are Convex from the Origin