Why do consumers prefer higher indifference curves (farther to the right) to lower indifference curves?
What will be an ideal response?
When comparing two indifference curves, it is always possible to find consumption combinations on the higher indifference curve that have more of both goods than any particular point on the lower indifference curve. Consumers prefer consuming more goods rather than fewer, so they prefer the higher indifference curve because it offers more consumption of everything.
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In the short run, when the Fed raises the federal funds rate,
A) the real interest rate is unchanged so investment and consumption expenditure are not changed. B) the real interest rate temporarily falls, thereby increasing investment and consumption expenditure. C) the real interest rate temporarily increases, thereby decreasing investment and increasing consumption expenditure. D) the real interest rate temporarily increases, thereby decreasing investment and consumption expenditure. E) investment and consumption expenditure increase, thereby raising the real interest rate temporarily.
Refer to Figure 5.1. All else equal, an increase in total factor productivity will cause a
A) shift from PF1 to PF2. B) shift from PF2 to PF1. C) movement up and to the right along PF1. D) movement down and to the left along PF2.
A decrease in the number of dry cleaners in an area is represented by a(n):
a. downward movement along the dry cleaning supply curve. b. upward movement along the dry cleaning supply curve. c. leftward shift in the dry cleaning supply curve. d. rightward shift in the dry cleaning supply curve. e. vertical dry cleaning supply curve.
The usefulness of the price-taker model requires that the firm's decision makers
a. act to maximize their total revenue and fully understand marginal costs and marginal revenues. b. be able to draw accurate marginal cost and marginal revenue curves. c. place the social interest of the economy above their individual self interests. d. seek to maximize the profits of the firm.