Consider three baskets of goods below and assume that all of our assumptions hold. If A and C are on the same indifference curve, which of the following is true?

            Basket A: 5 Apples, 10 Bananas

            Basket B: 6 Apples, 12 Bananas

            Basket C: 15 Apples, 1 Banana

Question

Consider three baskets of goods below and assume that all of our assumptions hold. If A and C are on the same indifference curve, which of the following is true?

Basket A: 5 Apples, 10 Bananas

Basket B: 6 Apples, 12 Bananas

Basket C: 15 Apples, 1 Banana

BlackTom AI · Accepted Answer

We start by listing the bundles clearly so we can compare them: A = (5 apples, 10 bananas), B = (6 apples, 12 bananas), C = (15 apples, 1 banana).

Option 1: A is preferred to B
- Here, we compare A to B. Bundle B has more of both goods than A: 6 > 5 apples and 12 > 10 bananas.
- If a bundle has more of both goods, and the consumer is monotonic (as most basic consumer theory assumptions), B strictly dominates A, meaning B is strictly preferred to A.
- Therefore, the statement that A is preferred to B is false.

Option 2: A is preferred to C
- We are told that A and C lie on the same indifference curve. That means A and C are equally preferred to the consumer; they yield the same utility.
- If two bundles are on the same indifference curve, neither is preferred to the other. So saying A is preferred to C is false.

Option 3: B is preferred to C
- Since B dominates A (more of both goods), B lies on a higher indifference curve than A.
- A and C lie on the same indifference curve, which is lower than the curve on which B lies due to B’s strictly greater quantities of both goods relative to A.
- Hence, B is on a higher utility level than C, so B is preferred to C.

Option 4: C is preferred over B
- This would imply that C yields at least as much utility as B with at least one strict improvement, or that C lies on a higher or equal indifference curve as B. Given B dominates A and A is on a lower curve than B, and C shares a curve with A, C cannot be on a higher or equal curve to B.
- Therefore, C is not preferred to B; this statement is false.

Summary perspective: The only statement that aligns with the indifference-curve relationships described is that B is preferred to C, since B lies on a higher indifference curve than the one containing A and C, where A and C lie together on the same curve.

Consider three baskets of goods below and assume that all of our assumptions hold. If A and C are on the same indifference curve, which of the following is true? Basket A: 5 Apples, 10 Bananas Basket B: 6 Apples, 12 Bananas Basket C: 15 Apples, 1 BananaSingle choice

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