A consumer has preferences over two goods, X and Y. Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis. At the consumer's current consumption bundle, the consumer is spending all available income, and the marginal rate of substitution is less than the
slope of the budget constraint. We can conclude that the consumer
a. is currently maximizing satisfaction subject to the budget constraint.
b. could increase satisfaction by consuming more X and less Y.
c. could increase satisfaction by consuming less X and more Y.
d. could purchase more X and more Y and increase total satisfaction.
c
You might also like to view...
A perfectly competitive firm in a competitive labor market will hire more labor whenever
A) its average revenue product of labor exceeds the wage rate. B) the wage rate exceeds its average revenue product of labor. C) its value of marginal product of labor exceeds the wage rate. D) the wage rate exceeds its value of marginal product of labor.
About what percentage of the poor are children?
a. 13 b. 24 c. 36 d. 60
When a tax is imposed on a good for which the supply is relatively elastic and the demand is relatively inelastic,
a. buyers of the good will bear most of the burden of the tax. b. sellers of the good will bear most of the burden of the tax. c. buyers and sellers will each bear 50 percent of the burden of the tax. d. both equilibrium price and quantity will increase.
Pure public goods:
A. are, by definition, goods and services provided by the government. B. should always be provided by government. C. should always be provided by private firms. D. are frequently provided by the government, and are sometimes provided by private firms.