Aisha and Debbie Both Purchase Milk and Bread at the Same

question 202

Multiple Choice

Aisha and Debbie both purchase milk and bread at the same Quik Mart. They have different tastes for milk and bread and different incomes. They both buy some milk and some bread, but they buy considerably different quantities of the two goods. Which of the following statements is true, given that Aisha and Debbie are utility-maximizers?

• A) In equilibrium, their marginal rate of substitution between milk and bread is the same.
• B) In equilibrium, their marginal rate of substitution between milk and bread is higher for the person with the higher income.
• C) In equilibrium, the marginal rate of substitution between milk and bread is greater for the person who prefers milk more than bread.
• D) No statement can be made about their respective marginal rates of substitution without their budget constraint/indifference curve diagrams.

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Definitions:

Breach of Contract

A violation of any of the agreed-upon terms and conditions of a binding contract.

Co-Insurance Clause

A clause that may be inserted in an insurance policy that renders the insured an insurer for a part of the loss if the insured fails to maintain insurance coverage of not less than a specified minimum amount or percentage of the value of a property.

Indemnity

A contractual promise to compensate for loss or damage incurred by the promisee.

Property Worth

The market value of an asset or property, determined by factors such as location, condition, and market trends.