Question 3
Suppose there are only two goods and we plot good 1 on the x-axis and good 2 on the y-axis. Which of the following statements is true?
True: \(\text{MR}S_{1,2}=\ -slope\ of\ indifference\ curve\)
false: \(\text{MR}S_{1,2}=\ slope\ of\ indifference\ curve\)
True: If preferences are strictly monotonic, then the slope of the indifference curves is strictly negative.
False: If preferences are strictly monotonic, then the slope of the indifference curves is strictly positive.
Explanation:
One side of the indifference curve corresponds to higher ranking elements. Monotonicity means that all points to the north-east must be on the side where higher ranking elements are.