Question 1
The following are key characteristics of Indifference Curves, EXCEPT:
A. Each indifference curve identifies the combinations of X and Y where the consumer is equaly happy. 

B. Indifference curves are convex to the origin because X and Y are assumed to be close substitutes. 

C. For any combination of X and Y there is one and only one Indifference Curve. 

D. Indifference curves cannot logically cross between them if preferences are well defined. Question 2 The following are key characteristics of the Optimal Consumer's Allocation, as presented in class, EXCEPT: Notation: BC = Budget Constraint IC= Indifference Curve MUx = Marginal Utility for x MUy = Marginal Utility for y Question 2 options:

Q1. (b) is false.Indifference cuves are convex to the origin becuase the marginal rate of substitution diminshes as consumption of one good is increased.
Q2. (c) is false. The optimal allocation is unique due to convex indifference curves which in turn is due to diminishing marginal rate of substitution.
Q3. (d) is false. Substitution effect will lead to a decline in X but an increase in Y because under substition effect utility is kept constant, So to keep utility constant, Y should increase when X decreases.
Q4. (d) is false.
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