Prove formally that the rationality axioms alone rule out the possibility of indifference curves crossing.
What will be an ideal response?
and 
. But we know that 
. Transitivity implies that 
and 
implies 
--- which contradicts A and C lying on the same indifference curve. Thus, it can't be that indifference curves cross and the indifference map satisfies transitivity.You might also like to view...
Russia and Qatar made the first serious moves in October 2008 toward forming an OPEC-style cartel for natural gas. The two strategies these countries face are to comply with the cartel agreement or to cheat on the cartel agreement
If both countries comply, the economic profit for each will be $140 million. If one country cheats, that country earns $200 million in economic profit and the other country will have an economic loss of $10 million. If all countries cheat, they break even. What is the outcome of this game if it is only played once? A) Each country will comply with the cartel agreement. B) Two countries will comply and one will cheat, but we cannot predict which one will cheat. C) One country will comply and two will cheat, but we cannot predict which ones will cheat. D) None of the countries will comply with the cartel agreement.
In Figure 15-2 above, the difference between consumption levels at point A and point B is equal to
A) the long run MPC times the change in disposable income. B) the short run MPC times the change in disposable income. C) (Y0 - Y2 ) times the short run change in income. D) the long run change in income times (Y0 - YP).
Additions to the nation's capital stock are brought about through
A) the current account surplus. B) investment. C) investment and the current account surplus. D) investment and the government budget surplus.
If a business makes the determination that an investment makes sense at the current interest rate, but before they can act, the interest rates rises,
A. it will cause them to not make the investment regardless of the increase. B. they will have to recalculate whether it still makes sense. C. it will only make the situation better, so they will clearly make the investment. D. they will go ahead with the investment because interest rates have nothing to do with whether an investment makes sense.