Question

which option ? A OR B OR C OR D

Jon is always willing to trade one can of Coke for one can of Sprite, or one can of Sprite for one can of Coke. 18 What can you say about Jon's marginal rate of substitution? Jon's marginal rate of substitution is equal to 1. (Enter your response as an integer.) The figure to the right includes two budget lines with different slopes (L1 and L2) What conclusions can you draw about Jon's satisfaction-maximizing choices? A. Never will any combination of Coke and Sprite along Jon's budget line maximize his satisfaction. O B. Jon will never choose a comer solution. ° C. If the ratio of the price of Sprite to the price of Coke is greater than one, then Jon wiiï only consume Coke. O D. If Jon's budget line is flatter than his indifference curves, then he will only consume Coke O E Jon will always only consume Sprite. 10 12 14 16 18 20 Sprite

Answer 1

Marginal rate of substitution= 1 because 1unit of sprite is equal to 1 unit of coke

when budget line is L1 then equilibrium is achieved at sprite=14 and coke=0

where as when budget line is L2 then equilibrium is achieved at sprite=0 and coke=18

mCQ ans is C. If price of sprite/price of Coke>1 then consume only Coke=M/price of Coke

Ans is C