1. Draw two typical indifference curves for each of the following cases. What is the MRS
in each case?
a. Name-brand aspirin and generic aspirin for a consumer who considers the two goods
equal in every way.
b. Right gloves and left gloves for a consumer who only wants to wear gloves in pairs.
Put right gloves on the x-axis.
c. Right gloves and left gloves for a rock star who regards right gloves as useless. That is,
he only wears left gloves and does not care whether he has right gloves or not. Put right
gloves on the x-axis.
2. Marginal Rate of Substitution
a. Consumers in Georgia pay twice as much for avocados as they do for peaches.
However, avocados and peaches are the same price in California. If consumers in both
states maximize utility, will the marginal rate of substitution of peaches for avocados be
the same for consumers in both states? If not, which will be higher? (Graphs not needed.)
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