When indifference curve analysis is used, a consumer optimum occurs at the point at which
A. the indifference curve is tangent to the budget line.
B. the indifference curves intersect.
C. marginal utility/price ratio of all goods consumed is equal.
D. total utility is maximum.
Answer: A
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The price of silver increases from $10 per ounce to $15 per ounce while the price of gold increases from $300 per ounce to $310. In this situation, the price of silver relative to the price of gold has
a. fallen. b. risen. c. remained the same. d. cannot be determined given the information provided.
Which of the following statements is correct?
A) PPP is a theory of exchange rate determination. B) Inflation differentials cause changes in exchange rates. C) PPP is an equilibrium relationship between two endogenous variables. D) PPP, or the law of one price, should hold well for individual goods.
As a consumer you believe yourself to act rationally, optimally and self-interestedly. You like ice cream and value a pint at $7 . Usually you buy a pint each week at $4 . This week however, the price jumped to $5 a pint. What would you do?
a. buy the ice cream since the price is still below your maximum willingness to pay b. buy the ice cream since even at the new price it gives you a positive amount of consumer surplus c. not buy the ice-cream since the price is now higher d. both A&B
Suppose the Swiss franc rises against the British pound but falls against the Japanese yen. What happens to the prices of goods imported into Switzerland?
A. British goods rise in price while Japanese goods fall in price. B. British goods fall in price while Japanese goods rise in price. C. Both British and Japanese goods rise in price. D. Both British and Japanese goods fall in price.