Exercises: Indifference curves and optimal choice

Say whether each statement about indifference curves is true or false, and justify your answer in one sentence:

1. a) They have a negative slope: to keep the same satisfaction, if you consume less of one good you must consume more of the other.
2. b) Two indifference curves of the same consumer can cross.
3. c) The farther a curve is from the origin, the higher the satisfaction it represents.
4. d) Indifference curves are straight lines parallel to the axes.

Ana has $\$120$; each taco costs $\$20$ and each soft drink $\$15$. The graph shows her budget line and two of her indifference curves, $U_1$ and $U_2$:

1. a) Read from the graph the combination marked with the ? sign: how many tacos and how many soft drinks is it? Check that this combination exactly uses up the budget.
2. b) Explain why any combination on curve $U_1$ gives her less satisfaction than the marked point, even though it is also affordable.
3. c) Could Ana reach an indifference curve higher than $U_2$ with her budget? Explain your reasoning.