{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# HW2_Key - ECO 3301 Fall 2010 Homework 2 Answer Key The due...

This preview shows pages 1–2. Sign up to view the full content.

ECO 3301 Fall 2010 Homework 2: Answer Key The due date for this assignment is Monday, September 20 (beginning of class) 1. Since more of each good is preferred to less, we can conclude that a market basket is preferred to an alternative basket if it lies above and to the right of the alternative basket. So, bundle B is preferred to all other bundles. A is preferred to D, C is preferred to D, but it°s not possible to rank A and C without more information. 2. Transitivity and More is Better together imply that indi/erence curves cannot cross. If two indi/erence curves did cross, then by choosing three points, A, B, and C in the following way. A lies on the ±rst indi/erence curve, B is the intersection point, C lies on the second curve, and A lies to the left and below point C. It is easily shown that the two axioms cannot both be satis±ed. A is at least as preferred as B, and B is at least as preferred as C. By transitivity A is at least as preferred as C, contradicting More is Better. See ±gure below.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}