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Suppose the price of Good X is $4 and the price of Good Y is $3. If a consumer has a Marginal Rate of Substitution (MRSxy) of 2 for the bundle they are considering, then given their budget constraint, the consumer... Select one O a. Cannot reach a higher level of utility given their budget constraint. Ob. Would have a higher utility if they bought more of Good X. c. Would have a higher utility if they bought less of Good X

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Answer #1

Ans) the correct option is b) would have higher utility if they bought more of good X

Price ratio = 4/3 = 1.33

MRS = 2

Since MRS is higher than price ratio so more of good X should be consumed.

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