Mary Granola Consumes Tomatoes and Nectarines

Mary Granola consumes tomatoes and nectarines. Mary's indifference curves are kinky. When she is consuming more tomatoes than nectarines, she is just willing to trade 3 tomatoes for 1 nectarine. When she is consuming more nectarines than tomatoes, she is just willing to trade 4 nectarines for 1 tomato. Let P₁ be the price of nectarines, and P₂ the price of tomatoes. Mary maximizes her utility subject to her budget constraint. (Hint: Sketch one of her indifference curves.)

A) When P₁ > P₂, she must consume only tomatoes.
B) When P₁ > P₂, she must consume 3 times as many tomatoes as nectarines.
C) When P₁ > 3P₂, she must consume only tomatoes.
D) When 4P₁ > P₂, she must consume only nectarines.
E) She must consume equal numbers of both.

Correct Answer:

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