Assignment 2 True/False 1. If a person prefers steak to hamburger and hamburger
ID: 1166397 • Letter: A
Question
Assignment 2 True/False 1. If a person prefers steak to hamburger and hamburger to pork, we cannot conclude that the person prefers steak to pork because steak and pork are so different. 2. A consumer's indifference curves can never intersect. 3. The marginal rate of substitution is constant along an indifference curve. 4. Perfect substitutes are indicated by L-shaped indifference curvers. 5. A change in income produces a parallel shift in the budget line. 6. The slope of the budget line is determined by the prices of the two goods. 7. A change in the price of one of the goods produces a parallel shift in the budget line. 8. A 10% increase in the price of both goods causes the budget line's slope to change. 9. A consumer will choose a market basket that is on the indifference curve farthest from the origin. 10. The consumer's equilibriumis characterized by MRs.,-Px /Py. 11. A corner equilibrium is characterized by MRSy P/Py 12. Consumers prefer less of an inferior good to more of it. 13. Under the Food Stamp Program, a family's consumption of food increases by the amount of the subsidy. 14. "Diminishing marginal rate of substitution" and "diminishing marginal utility" are different ways of viewing the same thing. 15. In deciding whether to buy an extra unit of one good over another, a rational consumer selects the good that provides the greatest marginal utility.Explanation / Answer
1. False; can be deduced from the syllogism
2. True; all points on a curve represent equivalent satisfaction
3 False; the Marginal rate of substitution decreases as one moves down an indifference curve; this is termed as the law of diminishing rate of marginal substitution
4. False
Goods are perfect complements; indifference curves are L-shaped
5. True
Increase in income - outward shift; prices are held constant; parallel to the original line
A decrease in income - inward shift; parallel to the original line
6. True
The ratio of prices of goods A, and, B
7. False
Change in price of one good leads to the rotation of the budget line
8. True
The slope of the budget line changes
9. True
It gives the consumer the highest total utility
10. The slope of the indifference curve = Slope of budget line
True
Consumers attain the most satisfaction possible