Budget Curves

Classified in Economy

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A consumer cannot be indifferent about two combinations that yield disparate levels of utility. Therefore, an indifference curve cannot be

d.

thick.

  140.   Each point along an indifference curve indicates a combination at which a consumer does not have a preference. Two divergent indifference curves can produce at least two points where there are distinct preferences. Therefore, indifference curves CANNOT

e.

intersect one another.

  141.   Perfect substitutes produce an indifference curve with a(n) ________ marginal rate of substitution.

d.

constant

  142.   ________ exist(s) when a consumer is completely indifferent between two goods.

b.

Perfect substitutes

  143.   ________ exist(s) when a consumer is interested in consuming two goods in fixed proportions.

c.

Perfect complements

  144.   A typical indifference curve that reflects the trade-off between two goods that are not ________ or ________ has a marginal rate of substitution that falls between these two extremes.

b.

perfect substitutes; perfect complements

  145.   The slope of the indifference curve for perfect substitutes

c.

is always negative.

  146.   The maximization point is the location at which an indifference curve and the budget constraint line

c.

are tangent to one another.

  147.   A change in price results in a(n) ________ of the budget constraint line.

a.

rotation

              Graphing only a change in price for a good does not distinguish the contribution of the ________ from the ________.

a.

substitution effect; real-income effect

  149.   For a low-priced good, the ________ is generally negligible and the substitution effect tends to ________.

d.

real-income effect; dominate

  150.   A new ________ that is parallel to the first one, but just tangent to the new indifference curve, will reveal the real-income effect.

d.

budget constraint line

139.

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