Rational consumer choice

Question 1

Assumption #1 for rational consumer preferences is non-satiation.

It means “More is ___”

Answer 1

better

Question 2

Assumption #1 for rational consumer preferences is ___.

It means “more is better.”

Answer 2

Non-satiation

Question 3

Visualize the parts of the figure below that are preferred to point x, according to the non-satiation (more is better) assumption.

Answer 3

Everything up and to the right of point x.

Question 4

Assumption #2 for rational consumer preferences is completeness.

It means we can ___ any two bundles of goods.

Answer 4

rank

Question 5

Assumption #2 for rational consumer preferences is ___.

It means we can rank any two bundles of goods.

Answer 5

completeness

Question 6

An indifference curve is the set of all bundles that are ___ preferred.

Answer 6

equally

Question 7

The set of all bundles of goods that are equally preferred (none of them is preferred to the other) forms an __ curve.

Answer 7

indifference

Question 8

Assumption #3 for rational consumer preferences is transitivity.

It means if we prefer A to B, and prefer B to C, then we also prefer __ to __.

Answer 8

A to C

Question 9

Assumption #3 for rational consumer preferences is __.

It means if we prefer A to B, and B to C, then we also prefer A to C.

Answer 9

transitivity

Question 10

Is utility ordinal or cardinal?

Answer 10

ordinal

Question 11

What does it mean to say utility is ordinal (rather than cardinal)?

Answer 11

It tells us if something is preferred to something else, not how much or how intensely its preferred.

Question 12

An indifference curve is the set of all bundles with the same ___.

Answer 12

utility

Question 13

What’s wrong with this picture of two indifference curves?

Answer 13

Indifference curves can’t cross

Question 14

Which of these two indifference curves corresponds to higher utility?

Answer 14