Chuck and Diane are both currently consuming 15 apples and 3 bananas each week, which we can callbundle A. Assume that bananas are the horizontal axis good for both consumers.Let's say both Chuck and Diane consume one more banana each week (4 bananas in total), moving totheir respective bundle B on their own indifference curves. In order for Chuck and Diane to remain onthe same indifference curve:• Chuck must give up 3 apples, to account for the marginal utility gained from a fourth banana● Diane must give up 5 apples, to account for the marginal utility gained from a fourth bananaBased on the information above, what can we tell about Chuck and Diane's preferences?Diane's indifference curves are flatter than Chuck's indifference curvesChuck and Diane have the same MRS between the bundles with 3 and 4 bananas MRS atThe absolute value of the slope of Diane's indifference curves is greater for Diane than ChuckAll of the above statements are true

Answered: Chuck and Diane are both currently…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Chuck and Diane are both currently consuming 15 apples and 3 bananas each week, which we can call
bundle A. Assume that bananas are the horizontal axis good for both consumers.
Let's say both Chuck and Diane consume one more banana each week (4 bananas in total), moving to
their respective bundle B on their own indifference curves. In order for Chuck and Diane to remain on
the same indifference curve:
• Chuck must give up 3 apples, to account for the marginal utility gained from a fourth banana
● Diane must give up 5 apples, to account for the marginal utility gained from a fourth banana
Based on the information above, what can we tell about Chuck and Diane's preferences?
Diane's indifference curves are flatter than Chuck's indifference curves
Chuck and Diane have the same MRS between the bundles with 3 and 4 bananas MRS at
The absolute value of the slope of Diane's indifference curves is greater for Diane than Chuck
All of the above statements are true

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In financial matters, the marginal rate of substitution (MRS) is the rate at which a buyer can surrender some measure of one great in return for one more great while keeping up with a similar degree of utility. At balance utilization levels (accepting no externalities), marginal rates of substitution are indistinguishable. The marginal rate of substitution is one of the three elements from marginal efficiency, the others being marginal rates of change and marginal efficiency of a component

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