Question

1. Given the following table showing various combinations of goods X and Y that bring equal satisfaction to an individual consumer: good X good Y 2 units 3 units 4 units 5 units 10 units 9 units 6 units 2 units In this table, as the individual consumes a greater amount of X, a amount of good Y is given up for each additional unit of good X. This pattern suggests that, as more of good X is consumed and less of good Y is consumed, the ratio MUX/MUy is a. larger; increasing, which contradicts economists' usual expectations b. larger; decreasing, which conforms to economists' usual expectations c. smaller; increasing, which contradicts economists' usual expectations d. smaller; decreasing, which conforms to economists' usual expectations 2. intersect; two Two indifference curves for an individual consumer community indifference curves for a country a. cannot; also, cannot intersect b. cannot; can intersect under some circumstances c. can; can also intersect under some circumstances d. can; cannot intersect

Answer 1

1. D. Smaller, Decreasing, which conforms to economists usuao expectations

Reason- As we consume more of good X, MUx falls due to law of diminishing marginal utility. So we are willing to give up less amount of Y. MRS=MUx/MUy is the slope of indifference curve. MRS decreases as we consume more of good X.

2. Cannot, also cannot intersect

Reason- Neither the individual nor the community indifference curve intersect. They are convex to the origin and are drawn for a particular level of utility.