Figure 6-2 Shows an Edgeworth Box with the Preferences of Kathy

question 52

Multiple Choice

Figure 6-2 shows an Edgeworth box with the preferences of Kathy and Tom toward bread and candy.
Figure 6-2
-At point C in Figure 6-2,which of the following is true of the comparison between Tim's marginal ate of substitution of candy for bread [MRS_CB] and Kathy's MRS_CB?

• A)Tim's MRS_CB is greater than Kathy's MRS_CB.
• B)Tim's MRS_CB is smaller than Kathy's MRS_CB.
• C)Tim's MRS_CB is equal to Kathy's MRS_CB.
• D)Tim's MRS_CB is zero and Kathy's MRS_CB is positive.

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Definitions:

Par Value

The face value of a bond or stock, as stated by the issuing company, which might not reflect its market value.

Callable

A feature of a financial instrument that allows the issuer to repurchase or redeem the instrument before its maturity date.

Yield To Call

The total return anticipated on a bond if it is held until the date it is called by the issuer, including interest payments and the call price.

Call Price

The price at which a bond or other financial security can be repurchased by the issuer before its maturity date, as specified in the callable feature.