QUESTION 4 4. Consider the following three market baskets: Basket A: 6 units of

Question

QUESTION 4 4. Consider the following three market baskets: Basket A: 6 units of food and 3 units of clothing, Basket B: 8 units of food and 5 units of clothing, Basket C: 5 units of food and 8 units of clothing. If preferences satisfy all four of the basic assumptions, which of the following statement Oa A is on the same indifference curve as B. Ob.B is on the same indiference curve as c. OC A is preferred to C Od.B is proferred to A is optimal? QUESTION 5 5. Suppose a consumer has a utility function of U(a, y) +. Which of the following basic assumption on preferences is violated? Ob. Transitivity OC More is better than less Od.Diminishing marginal rate of substitution. Ciek Save and Submit to save and submit. Click Save All Answers to save all answers

Explanation / Answer

Question 4 , Whatever his preferences are he'll always choose B over A .For option a) A and B cant be on the same IC curve if we take any utility function. For option b) it cant be on the same IC if we take utility function as U(F,C) = F^(0.9)*C^(0.1). For option c) It is also not true because he is getting more of both in basket C.

So, answer d)

Question 5 , It is violating the assumption of Diminishing Marginal rate of substitution. This assumption implies that MRS should must fall as we choose more of some good. In this case the graph will be concave which has no diminishing MRS.

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