Why are indifference curves convex to the origin?
What will be an ideal response?
Indifference curves are convex because of diminishing marginal utility. When a consumer has a large amount of good Y (and a small amount of good X), he will be willing to give up a great deal of good Y to receive a little more of good X. However, if the individual has only a small amount of good Y and a large amount of good X, he will not be very willing to give up good Y to receive more of good X.
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Which of the following describes the relationship between the actual federal funds rate and that suggested by Taylor's rule following the recovery from the 2001 recession?
A) The federal funds rate was above that suggested by Taylor's rule. B) The federal funds rate was below that suggested by Taylor's rule. C) The federal funds rate was about equal to that suggested by Taylor's rule. D) There was not a clear relationship between the federal funds rate and that suggested by Taylor's rule.
According to the textbook, NAFTA was expected to help which country exploit its comparative advantage in the production of goods made by unskilled labor?
A. The USA B. Cuba C. Canada D. Mexico
Other factors held constant, a decrease in resource prices will shift the aggregate:
A. demand curve leftward. B. demand curve rightward. C. supply curve leftward. D. supply curve rightward.
Marginal utility is calculated as
A. total utility/change in number of units consumed. B. total utility/number of units consumed. C. change in total utility/number of units consumed. D. change in total utility/change in number of units consumed.