Two friends are discussing their plans for the month. One works at a movie theat

Question

Two friends are discussing their plans for the month. One works at a movie theater and gets 10 free movie tickets, the other works at a concert venue and gets 10 free concert tickets.

For each person, we can predict that concerts and movies are:

A. complements, so the marginal rate of substitution is constant.

B. substitutes, so the marginal rate of substitution is 0.

C. substitutes, so the marginal rate of substitution is constant.

D. luxuries, so the marginal rate of substitution is variable.

For each person, the slope of their indifference curve will be:

A. constant.

B.positive.

C. zero.

D. falling.

Explanation / Answer

1. If the friends have decided to to split the profits equally among themselves, then each will exchange half the number of tickets witheach other. In that case,

A   is ture because the marginal rate of substituion between "movies" and " concerts" is constant.

For each person teh Slope of theri indifference curve aill be

A. Cosntant.

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