Econ 302 Homework 5 - Ali Toossi Homework 5 Chapter 3:...

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Ali Toossi Homework 5 Chapter 3: Questions for review Seventh edition page 77: Questions 3, 4, 6, 8. 3. True: The downward slope if the indifference curve exhibits diminishing marginal rate of substitution when, to hold utility constant, diminishing quantities of one good must be sacrificed to obtain successive equal increases in the quantity of the other good. The curves are downward sloping, which is a consequence of the assumption that as consumers have less and less of one good, they require more of the other good to compensate. 4. Coke Diet Coke Diet Coke Diet Pepsi Diet Pepsi Coke 6. When the MRS of the good that he prefers is always less than the slope of the budget constraint, the best the consumer can do is to spend all his income on the less preferable good although he prefers the other. 8. True: If the indifference curve map is concave to the origin, the optimal basket must lie on a corner equilibrium. Chapter 3:Problems
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This note was uploaded on 10/12/2008 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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Econ 302 Homework 5 - Ali Toossi Homework 5 Chapter 3:...

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