(1) True or False, and explain briefly. (a) The assumption that more is better i

Question

(1) True or False, and explain briefly. (a) The assumption that more is better implies that indifference curves are down ward sloping. (b) Consider the following three bundles: A = (3,7), B = (7,3) and C = (6,6). If bundle A and bundle B are on the same indifference curve of a consumer, and the preferences of this consumer satisfy all the assumptions introduced in class then this consumer must prefer bundle C to bundle A. (c) The utility functions U(x, y) ry and U(x, y)-y represent the same prefer- aces over bundles of goods.

Explanation / Answer

1.False.MRS implies that indifference curves are downward sloping.

2.True.Bundle C gives more utility to consumer(12), than bundle A and B(10)

3.False.Both the indifference curves are different and have different MRS.So, they can't represent same preferences.

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