An agent has preferences over two goods

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Determine whether each statement below is TRUE or FALSE and explain your reasoning

1. An agent has preferences over two goods X1 and X2 Suppose preferences are complete, transitive and continuous. Suppose they are also monotone and strictly concave. That is, the MRS is strictly increasing in X1 along the indifference curve. The agent has income m and faces positive prices P1 and P2 The agent will choose to consume both goods.

2. A firm has two variable factors and a production function f(X1 X2)=( 2X1+4X2)^1/2. The technical rate of substitution between X1 and X2 is constant.

Reference no: EM131166627

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