Question

Suppose Lea is presented with the following four bundles A=(14, 4), B = (10,6), C = (11, 6) and E=(8,8). Her preferences satisfy completeness, reflexivity and transitivity as well as strong monotonicity and strict convexity. It is also true that for Lea A~E

Which of the following statements, if any, is correct? (If no statement is correct, select "None".)

a.

None.

b.

For Lea, bundle C is strictly preferred to bundle A.

c.

For Lea, bundle C is strictly preferred to bundle B.

d.

Lea's favorite bundle among the four stated is A.

e.

For Lea, bundle C is strictly preferred to bundle E.

f.

For Lea, bundle E is strictly preferred to bundle A.

g.

Lea is indifferent between bundles A and C.

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Answer 1

c) For Lea, bundle C is strictly preferred to bundle B.

From the given information, that Lea is indifferent for bundle A and E, we can say that either Lea prefer equal amount of both, or prefers more of good 1.

Thus using this information, we can deduce that more of good 1 is preferable if both good are not equal. Thus from all the options, we can say that bundle C is strictly preferable to bundle B, because with same amount of good 2, bundle C proclvides more of good 1.