Question

An optimum that occurs as a corner solution A. cannot exhaust the budget constraint. B. includes only one good. C. cannot be an equilibrium. D. includes the exact same amounts of each good.

Answer 1

Answer:

B. includes only one good.

Explanation:

A corner solution is a microeconomics concept, which is used to illustrate the graphical representation of a situation where an individual wouldn't do some things at any cost or for any price.

Optimum is usually experienced on the consumer graph at the point where the indifference curve (IC) is just tangential to the consumer's budget constraint. Thus, the corner solution lies at the non-zero interior, which then means that none of the other goods is contained in the optimum.

Hence, an optimum that occurs as a corner solution includes only one good.

For instance, Tracy saying she wouldn't buy a XYZ phone for any price, or Sarah saying she would visit a museum no matter how much it will cost her are some examples of corner solution.