Suppose that consumer has the following utility function: U(X,Y) = X2 + Y2. Which of the following is correct? Preferences are convex and indifference curves are bowed outward from the origin since Law of Diminishing Marginal Utility fails to hold. Preferences are non-convex and indifference curves are bowed outward from the origin since Law of Diminishing Marginal Rate of Substitution fails to hold. Preferences are convex and indifference curves are bowed inward towards the origin since Law of Diminishing Marginal Utility holds. Preferences are convex and indifference curves are bowed inward towards the origin since Law of Diminishing Marginal Rate of Substitution holds.

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