question archive Refer to Figure Assume Ellen has two products available, pizza and hamburgers
Refer to Figure Assume Ellen has two products available, pizza and hamburgers
Subject:EconomicsPrice:2.87 Bought7
Refer to Figure Assume Ellen has two products available, pizza and hamburgers. Ellen is always willing to trade one pizza for one hamburger regardless of how many pizzas and hamburgers she has. The curve in Panel ---------- represents her indifference curve.
Select one:
a. A
b. B
c. D
d. C
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Answer:
The given situation says:
- the consumer is willing to give up one hamburger for one pizza
This means that the MRS is constant, and the goods are perfect substitutes.
There is no diminishing nature of the MRS. This implies that the IC will be a straight line, and downward sloping.
This is correctly shown in Panel A. The consumer can substitute one good for the other, at a constant rate.
Correct answer:
a) A
