Question

Max prefers

  Who-Hash to eggs, sausage and Spam

eggs, sausage and Spam to green eggs and ham

green eggs and ham to linguine and clams

linguine and clams to Who-Hash.

(a) What basic assumption about consumer preferences does this violate?

(b) Cindy-Lou tries to convince Max that he is irrational, but he insists that in each two-meal comparison above, the value of his more-preferred meal is at least $1 more than the value of his less-preferred meal. Advise Cindy-Lou on how she might make money by taking advantage of Max’s preferences.

Answer 1