The figure above shows one of Bob's indifference curves for CDs and books
a) Is the indifference curve steeper at point a or point b?
b) What is Bob's marginal rate of substitution at point a?
c) What is Bob's marginal rate of substitution at point b?
a) The indifference curve is steeper at point a.
b) The marginal rate of substitution at point a is 5 CDs per book, the slope of the line that just touches the indifference curve at this one point.
c) The marginal rate of substitution at point b is 1 1/2 CDs per book, the slope of the line that just touches the indifference curve at this one point.
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Costa Rica is a leading exporter of bananas. What explains the comparative advantage of this country in banana production?
A) investment by multinational firms such as Chiquita Brands International and the Dole Food Company B) climate and soil conditions in Costa Rica which are well-suited for banana production C) positive externalities D) a large supply of unskilled labor
If the price of one good increases, and as a result the demand for another related good falls, the goods are
A) substitutes. B) normal goods. C) complements. D) inferior goods.