7. Mary Joe has preferences for food X) and clothing (Y) governed by the followi

Question

7. Mary Joe has preferences for food X) and clothing (Y) governed by the following utility function: U(X, Y) X*Y +X a. Are her preferences quasi-linear? Why or why not? Do her preferences exhibit a diminishing MRS? Sketch a few of her indifference curves and decide whether preferences are weakly or strictly (strongly) monotonic and convex. i. Mary Joe's preferences quasi-linear and exhibit a diminishing MRS (marginal rate of substitution) a. Are ; do b. Are ; do not c. Are not; do d. Are not ; do not ii. Her preferences are monotonic andco a. Strictly; strictly b. Strictly ; weakly c. Weakly strictly d. Weakly; weakly

Explanation / Answer

7.

U(X,Y)= XY+X

a. Mary Joe's preferences are not quasi-linear as none of the variable x or y is linearly related with the utility function and do exhibit diminishing MRS with respect to x

the correct option is d

b. Her preferences are strictly monotonic as marginal utilities are positive and MRS is weakly convex as MRS diminishes with respect to x and not with respect to y.

MRS=(Y+1)/X

the correct option is b

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