Question

1. If indifference curves cross, this violates the assumption:

A. that consumer preferences are complete.

B. that more of a good is better.

C. of transitivity.

D. that the more a consumer has of a particular good, the less she is willing to give up of something else to get even more of that good.

2. The concept of utility makes it possible to calculate.

A. how much happier one bundle of goods makes a person than some other bundle of goods.

B. which consumer values a particular good more highly.

C. how expensive a bundle is

D. how rational the consumer is

3. Diminishing Marginal Utility represents the concept:

A. Consumers can compare bundles of goods and rank them

B. Non-satiation

C. consumers are rational

D. The more of a particular you have, the less you are willing to give up of something else to get even more of that good

4. What does the Marginal Rate of Substitution describe?

A. How much of one good are you willing to give up to be better off.

B.The utility value when a bundle is consumed.

C.How much of one good are you willing to give up for one more unit of another good and be equally happy.

D. Marginal utility.

5. What kind of goods are most likely to be perfect complements?

A. Orange and apple

B.Pizza and soda

C.Right shoe and left shoe

D. Car and bicycle

Answer 1

Q1) correct option - C. of transitivity

When two indifference curve cross each other it violates the law of tansitivity.

here suppose IC1 > IC2.. Then A > B. But here two IC curves are intersecting resulting C the intersecting and common point. Which mean if A = C, and B = C this implies A = B. Which is not true.

Q2) correct option - A. how much happier one bundle of goods makes a person than some other bundle of goods.

Suppose there are two bundle of goods on two indifference curve A & B. Where A > B. And as the utility is cardinal measure and obviously consumer will prefer bundle of goods on curve A in comparison with curve B. By the use of utility we can calculate how much more utility consumer is deriving by consuming on A in comparison with B.

Q3) correct option - D. The more of a particular you have, the less you are willing to give up of something else to get even more of that good.

As we know indifference curve is downward sloping means as we go from left to right along the curve. We will find change in Y is less than change in X which means consumer is willing to forgive lesser and lesser amount of Y to get 1 more unit of X. Which also mean consumer marginal utility of consuming one more unit of good X is decreasing continuously. And this is diminishing marginal utility.

Q4) correct option - C.How much of one good are you willing to give up for one more unit of another good and be equally happy.

This the basic concept of indifference curve. Indifference curve represent collection of bundles having different quantity of two goods giving equal utility along the curve. And it is downward sloping from it we can see how much consumer is giving up one good to consume 1 unit of addition on another good and still derive the same total utility. Marginal rate of substitution decreases as we go from left to right along curve.

Q5) correct option - C.Right shoe and left shoe.

We can't wear a pair of right shoe and same is with left shoe. There both the shoe is compulsory for each other. No other combination is there. Therefore they are perfectly complimentory.