Consider the following three market baskets:Table 3.1

-Goods that are considered "bads" have this characteristic:
A) their marginal rates of substitution are constant.
B) for those goods, less is preferred to more.
C) preferences for those goods are not complete.
D) those goods have horizontal or vertical indifference curves.

Question

Consider the following three market baskets:Table 3.1
 
-Goods that are considered "bads" have this characteristic:
A) their marginal rates of substitution are constant. 
B) for those goods, less is preferred to more. 
C) preferences for those goods are not complete. 
D) those goods have horizontal or vertical indifference curves.

Quizplus · Accepted Answer

Goods that are considered "bads" are those for which less is preferred to more. This means that as the quantity of the good increases, the consumer's satisfaction decreases. Examples of bads include pollution, traffic congestion, and garbage. Therefore, option B is the correct choice. Option A (their marginal rates of substitution are constant) is incorrect because this is a characteristic of goods that are perfect substitutes or perfect complements, not bads. Option C (preferences for those goods are not complete) is incorrect because completeness of preferences is a property of all goods and not just bads. Option D (those goods have horizontal or vertical indifference curves) is incorrect because this is a property of perfect substitutes and perfect complements, not bads.

Consider the Following Three Market Baskets:Table 3.1