In Problem 1, Charlie's indifference curves have the equation , where larger constants correspond to better indifference curves. Charlie strictly prefers the bundle (5, 11) to the bundle
A) (11, 5).
B) (6, 10).
C) (8, 6).
D) More than one of these options are correct.
E) None of the above are correct.

Question

In Problem 1, Charlie's indifference curves have the equation  , where larger constants correspond to better indifference curves. Charlie strictly prefers the bundle (5, 11) to the bundle
A) (11, 5). 
B) (6, 10). 
C) (8, 6). 
D) More than one of these options are correct. 
E) None of the above are correct.

Quizplus · Accepted Answer

To determine which bundle Charlie strictly prefers to (5,11), we need to check which bundle lies on a higher indifference curve.

Plugging in the coordinates for bundle (5,11), we get: 
11 = 5e^a --> a = ln(11/5)

For bundle (11,5), plugging in those coordinates we get: 
11 = 11e^b --> b = 0

For bundle (6,10), plugging in those coordinates we get: 
11 = 6e^c --> c = ln(11/6)

For bundle (8,6), plugging in those coordinates we get: 
11 = 8e^d --> d = ln(11/8)

Comparing the values of a, b, c, and d, since ln(11/6) > ln(11/5), Charlie strictly prefers (6,10) to (5,11). However, since ln(11/8) > ln(11/6), Charlie strictly prefers (8,6) to (6,10).

Therefore, the correct answer is C.

In Problem 1, Charlie's Indifference Curves Have the Equation