WeekofJan26_solns

WeekofJan26_solns - in fact contain more movies than...

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Recitation 1 Xiao Wei 1) a) False, although he is currently willing to trade 4 movie tickets for 1 basketball ticket, this may be due to the fact that he is endowed with hundreds of movie tickets. Diminishing MRS of movie tickets, especially if the many tickets are all for the same movie, can imply that he prefers a marginal basketball ticket more than a marginal movie ticket. Since he can sell or trade them, he can also “move” to other points in his budget set with different MRS’s. However, one cannot conclude that he likes basketball better than movies in general. b) False, see above. Since he cannot sell or trade them, all one can conclude is that he prefers a marginal basketball ticket more than a marginal movie ticket. His utility maximizing bundle may
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Unformatted text preview: in fact contain more movies than basketball games. 2) a) b) This utility function shows strictly diminishing MRS, so the MRS is greater than that of the optimal bundle in part a. 3) If Bob dislikes both x and y, his indifference curves will be downward sloping. If Bob likes one but not the other, his indifference curves will be upward sloping. 4) 5) For Bob, For Mary, 6) a) Completeness is satisfied because is defined for all b) Transitivity is satisfied. In the domain, if , and , then , and . Thus, , and . The same can be shown for other inequalities or equality in the and/or domain. c) More-is-better is not satisfied. . 20 110 100 50 40 (40, 30)...
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