In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the price of good x (Px) is higher in district A. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions.

Is the statement: ‘The MRS at the optimal choices of two individuals can be the same’ true, false, or uncertain? Please explain your answer intuitively and graphically.

Expert Solution

Rahul Sunny answered 2 years ago

In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the prices of good x (Px) and good y (Py) are higher and lower in district A, respectively. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Evaluate the following statement: ‘The MRS at the optimal choices of two individuals are the same’. True, false, or uncertain? Explain your answer intuitively...

In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the prices of good x (Px) and good y (Py) are higher and lower in district A, respectively. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Is the statement: “The MRS at the optimal choices of two individuals are the same” true, false, or uncertain? Explain your answer intuitively and...

In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the price of good x (Px) is higher in district A. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Evaluate the following statement: ‘The MRS at the optimal choices of two individuals can be the same’. True, false, or uncertain? Explain your answer intuitively and graphically.

In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the price of good x (Px) is higher in district A. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Evaluate the following statement: ‘The MRS at the optimal choices of two individuals can be the same’. True, false, or uncertain? Explain your answer intuitively and graphically. (4/20)

In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the prices of good x (Px) and good y (Py) are higher and lower in district A, respectively. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Evaluate the following statement: ‘The MRS at the optimal choices of two individuals are the same’. True, false, or uncertain? Explain your answer intuitively...

In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the prices of good x (Px) and good y (Py) are higher and lower in district A, respectively. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Evaluate the following statement: ‘The MRS at the optimal choices of two individuals are the same’. True, false, or uncertain? Explain your answer intuitively...

In a two goods (x and y) world, two districts (A and B) are identical, except...

In a two goods (x and y) world, two districts (A and B) are identical, except the price of good x (Px) is higher in district A. Suppose two identical individuals (i.e. same preferences and income) live in the two districts separately and their optimal choices are interior solutions. Evaluate the following statement: ‘The MRS at the optimal choices of two individuals can be the same’. True, false, or uncertain? Explain your answer intuitively and graphically.

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In a two goods (x and y) world, two districts (A and B) are identical, except...

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