2. Nancy Lerner is taking a course from Professor Goodheart who will count only

Question

2. Nancy Lerner is taking a course from Professor Goodheart who will count only her best midterm grade and from Professor Stern who will count only her worst midterm grade. In one of her classes, Nancy has scores of 50 on a her second midterm. When the first midterm score is m axis and her second midterm score on the vertical, her indifference curve has a slope of zero at the point (50,30). Therefore it must be that (a) this class could be Professor Goodheart's but couldn't be Professor Stern's. (b) this class could be Professor Stern's but couldn't be Professor Goodheart's. (c) this class couldn't be either Goodheart's or Stern's (d) this class could be either Goodheart's or Stern's.

Explanation / Answer

When the marginal rate of substitution is zero we can infer that the change in the quantity measured on vertical axis is 0 for any change in the quantity measured on the horizontal axis. This would imply that the change in the second midterm is code is 0 for any change in the first midterm score. This is true for the combination (50, 30). We can see that the better grade is 50 which belongs to her score on the first midterm. Because the second midterm is measured on the vertical axis and it is fixed at 30, professor Stern has counted her second midterm grade. Therefore option B is correct.

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