Answer to Question #288829 in Microeconomics for Ali

Question

Muoki says, “I’d rather see an action movie than a comedy, and I’d rather see a comedy

than a foreign film. But given the choice, I think I’d rather see a foreign film than an action

movie. Which of these statements about individual preferences is violated?

A. Muoki’s preference ordering is complete

B. Muoki’s indifference curves are convex to the origin

C. Muoki’s indifference curves are negatively sloped

D. Muoki’s preferences are transitive

2. Peter likes one cup of tea with two teaspoons of sugar. He gets no extra utility for an

additional cup of tea if he doesn’t have two teaspoons of sugar and no extra utility for extra

sugar without a cup of tea. Paul has,

A. Linear and negatively sloped indifference curves

B. Linear and positively sloped indifference curves

C. L-shaped indifference curves

D. Vertical indifference curves

3. Diminishing marginal rate of substitution of ugali (X) for rice (Y), MRSXY means that the

rate of substitution of ___________.

Answer 1

(D)

(C)

The rate of substitution decreases as one substitutes ugali for rice. One will be willing to give up less and fewer units of ugali to get an extra unit of rice to remain at the same level of satisfaction.