What is the shape of the indifference curve with diminishing MRS? *
a) Convex towards the origin
b) Concave towards the origin
c) Horizontal straight line
d) Vertical straight line
Answers
Answer:
a. The law of diminishing marginal rates of substitution states that MRS decreases as one moves down a standard convex-shaped curve, which is the indifference curve.
b. Indifference curves can be straight lines if a slope is constant, resulting in an indifference curve represented by a downward-sloping straight line. If the marginal rate of substitution is increasing, the indifference curve will be concave to the origin.
c. Indifference curves can be straight lines if a slope is constant, resulting in an indifference curve represented by a downward-sloping straight line. If the marginal rate of substitution is increasing, the indifference curve will be concave to the origin.
d. An indifference curve cannot be horizontal. In Figure 4 (C) the indifference curve is shown as vertical and combination В is preferred to A as the consumer has more of Y and the same quantity of X. Therefore, an indifference curve cannot be vertical either.
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