Question

The utility that Julie receives by consuming food F and clothing C is given by U(F,C) = FC. For this utility function, the marginal utilities are MUF = C and MUC = F.

1) On a graph with F on the horizontal axis and C on the vertical axis, draw indifference curves for U = 12, U = 18, and U = 24.

2) Do the shapes of these indifference curves suggest that Julie has a diminishing marginal rate of substitution of food for clothing?
True/False

3) Do the shapes of these indifference curves suggest that Julie has a diminishing marginal rate of substitution of food for clothing? Explain.

4) Using the marginal utilities, show that the MRSF,C = C/F . What is the slope of the indifference curve U = 12 at the basket with 2 units of food and 6 units of clothing?
a. -6
b. -3
c. -2
d. -1
e. None of the above.

5) What is the slope of the indifference curve U = 12 at the basket with 4 units of food and 3 units of clothing?
a. -3
b. -4
c. -0.75
d. -1.33
e. None of the above.

6 Do the slopes of the indifference curves indicate that Julie has a diminishing marginal rate of substitution of food for clothing?
True/False

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