# Diff 1 section 31 49 an island economy produces only

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Diff: 1Section:3.149) An island economy produces only two goods, coconuts and pineapples.There are five people (A,B,C, D, and E) living on the island with these preferences:Ahas a strong preference for pineapples.Bhas a strong preference for coconuts.Cdoesn't care for pineapples (assigns no value to them).Ddoesn't care for coconuts (assigns no value to them)Ewill only consume pineapples and coconuts in the fixedproportion of one pineapple to one coconut.For each of these five individuals, construct a representative indifference curve with pineapples on thevertical axis and coconuts on the horizontal axis.Discuss the shape of the indifference curves and relatethem to the MRS.
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D's indifference curves are horizontal; the level of satisfaction is affected only by pineapples.E's indifference curves are L-shaped.MRS measures (at the margin) the maximum number of pineapples that the consumer will be willing togive up in order to get one more unit of coconuts.A's MRS is low.A is willing to relinquish few pineapples relative to coconuts since pineapples are dearto A.B's MRS is high, for the opposite reason.C's MRS is infinite.Since C's utility is not affected by pineapples, she is willing to relinquish allpineapples (an infinite number) to obtain additional coconuts.D's MRS is zero.D is not willing to give up any pineapples to obtain additional coconuts.E's MRS is infinite when Qp> Qc, zero when Qc> Qp, and undefined when Qc= Qp.Diff: 1Section:3.150) The following combinations of goods X and Y represent various market baskets.Consumption ismeasured in pounds per month.Market BasketUnits of XUnits of YA46B167C153D32Explain which market basket(s) is(are) preferred to other(s), and if there is any uncertainty over which ispreferable, point this out as well.
Diff: 2Section:3.116

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Term
Spring
Professor
larson
Tags
indifference curves, Diff