The absolute value of Mar's MRS at his current consumption bundle is greater than 3.(That is, MU1/MU2 F1 3).Mars has convex preferences and is currently consuming positive amounts of both goods.
A)Taking away some of good 1 and giving Mars 3 units of good 2 for each unit of good 1 taken away will necessarily make him worse off.
B)Taking away some of good 1 and giving Mars 3 units of good 2 for each unit of good 1 taken away will necessarily make him better off.
C)Giving Mars some of good 1 and taking away 3 units of good 2 for each unit of good 1 he is given will necessarily make him worse off.
D)Giving Mars some of good 1 and taking away 3 units of good 2 for each unit of good 1 he is given will necessarily make him better off.
E)More than one of the above is true.

Question

The absolute value of Mar's MRS at his current consumption bundle is greater than 3.(That is, MU1/MU2 F1> 3).Mars has convex preferences and is currently consuming positive amounts of both goods.
A)Taking away some of good 1 and giving Mars 3 units of good 2 for each unit of good 1 taken away will necessarily make him worse off.
B)Taking away some of good 1 and giving Mars 3 units of good 2 for each unit of good 1 taken away will necessarily make him better off.
C)Giving Mars some of good 1 and taking away 3 units of good 2 for each unit of good 1 he is given will necessarily make him worse off.
D)Giving Mars some of good 1 and taking away 3 units of good 2 for each unit of good 1 he is given will necessarily make him better off.
E)More than one of the above is true.

Quizplus · Accepted Answer

Since Mars's MRS is greater than 3, he values good 1 more than 3 units of good 2. Taking away good 1 and giving him only 3 units of good 2 will make him worse off.

The Absolute Value of Mar's MRS at His Current Consumption