Question

An inferior good:

a.has a price elasticity of demand less than negative one

b.has an income elasticity of demand less than one

c.has an income elasticity of demand less than zero

d.is the same as a necessity

An underlying assumption in development of indifference curves is that consumers

a.can rank alternative consumption bundles

b.have tastes that change along a given indifference curve

c.prefer less to more

d.none of the above

The marginal rate of substitution is:

Group of answer choices

a.the rate at which consumers substitute for one good as its price changes

b.the rate at which utility changes as consumption bundles change

c.the rate at which total substitution changes as overall consumption changes

d.the rate at which consumers substitute one good for another while staying on the same indifference curve

If a firm is using a lot of capital and a small amount of labor, the marginal product of labor is ___________________ and the marginal product of capital is ___________:

a.higher than that of capital; lower than that of labor

b.likely low relative to the marginal product of capital; high relative to that of labor

c.lower than if more labor were being used; higher than if less capital were being used

d.higher than if more labor were being used; lower than if less capital were being used

The production function given by Q = 2K + L has _______________returns to scale.

a.constant

b.instant

c.increasing

d.decreasing

Answer 1

c.has an income elasticity of demand less than zero. This is because for inferior good, the demand decreases as the income is increased which means income elasticity will be negative

a.can rank alternative consumption bundles. Along the same indifference curve there are different bundles that generate the same utility. this implies that across different indifference curves different bundles can be ranked according to the utility

d.the rate at which consumers substitute one good for another while staying on the same indifference curve

d.higher than if more labor were being used; lower than if less capital were being used

a.constant