The Theory of Consumer Choice

Question 1

The slope of the budget line represents an opportunity cost because, moving along the line,

Answer 1

A consumer must give up some of one good in order to get more of the other

Question 2

What is an indifference curve?

Answer 2

A curve that shows combinations of goods between which consumer is indifferent.

Question 3

When talking about goods,

Answer 3

More is better

Question 4

What is a budget constraint graph?

Answer 4

A line that shows combinations of goods, or bundles, the consumer can afford given their income AND the prices of goods

Question 5

The marginal rate of substitution is..

Answer 5

Equal to the magnitude of the slope of the indifference curve

Question 6

Any point above a given indifference curve _____ affordable and is _____ to any point on the indifference curve

Answer 6

might or might not be; preferred

Question 7

Indifference curves cannot

Answer 7

Overlap onto each other

Question 8

What does it mean to be at the consumer equilibrium?

Answer 8

You are on the highest attainable indifference curve and you are dividing your budget equally across goods