What is an indifference curve? Why can indifference curves never cross?
What will be an ideal response?
An indifference curve shows the combination of consumption bundles that give the consumer the same utility. Indifference curves never cross because we assume consumers have transitive preferences. If a consumer prefers consumption bundle A to consumption bundle B, and he prefers consumption bundle B to consumption bundle C, then he must prefer bundle A to bundle C. If indifference curves cross, this assumption is violated.
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After the implementation of the congestion tax in London, traffic volume was reduced and travel time for cars and buses was cut in half. This is an example of
A) caveat emptor. B) comparative advantage. C) responding to incentives. D) the role of pricing in allocating resources.
Considering the relevant market structures, which is an INCORRECT statement?
A) In a perfectly competitive situation, there is an extremely large number of firms. B) In pure monopoly, there is only one firm. C) In monopolistic competition, there is a large number of firms. D) In any market situation, the number of firms is not very important.
The government's fiscal policy is its plan to influence aggregate demand by changing
a. the money supply. b. minimum wage levels. c. sales taxes. d. taxation and spending.
A positive externality
a. causes the product to be overproduced. b. provides an additional benefit to market participants. c. benefits consumers because it results in a lower equilibrium price. d. is a benefit to a market bystander.