What is the marginal rate of substitution, and what role does it play in determining the consumer’s optimum choice?
What will be an ideal response?
The MRS is the slope of the indifference curve and represents the maximum amount of one commodity the consumer is willing to give up in exchange for one more unit of another commodity. The optimum choice of goods occurs where the budget line is tangent to the highest attainable indifference curve. At that point the MRS equals the slope of the budget line. In other words, the consumer’s willingness to trade one good for another just equals the market cost of the trade-off.
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Which of the following statements is NOT true?
A. The United States government ensures that competition flourishes, that information flows freely, and that property rights are protected. B. The price mechanism will work best if there are a enough firms in each industry to ensure that no one firm can influence price. C. Environmental pollution is considered a market failure. D. Everything produced by the public sector is a public good.
Which of the following would be most likely to have monopoly power?
a. an online bookstore b. a municipal water company c. a local restaurant d. a grocery store
A heuristic is a:
A. positive-framing method. B. formal policy used by firms to drive employee behavior. C. mental shortcut that helps us make decisions. D. method to increase the price of your vices.
Government spending is funded by a system of
A. taxation and borrowing. B. checks and balances. C. policies and laws. D. states and cities.