The magnitude of the slope of an indifference curve is:
A) called the marginal rate of substitution.
B) equal to the ratio of the total utility of the goods.
C) always equal to the ratio of the prices of the goods.
D) all of the above
E) A and C only
Question 2
Suppose the price of crude oil is 95 per barrel in New York and 85 per barrel in Texas, and the transaction costs for trading between the two markets are 15 per barrel. What actions should you take to arbitrage this price difference?
A) Buy oil in Texas and sell oil in NY
B) Sell oil in Texas and buy oil in NY
C) Buy oil in both markets and wait for higher prices
D) Do not buy or sell oil in either market
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