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Question
| Explain the concept of the marginal rate of substitution. Provide an intuitive rather than mathematical reason it is believed to be diminishing as a consumer moves down an indifference curve. |
Answer
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Related questions
Q:
An indifference curve is a line showing all of the consumption bundles that:
A) an individual can purchase with a given income.
B) yield the same total utility for an individual.
C) yield the same marginal utility.
D) have the same marginal rate of substitution.
Q:
Scenario: E-Books and Sports Tickets
Phillip has an income of $300 per month, which he uses to purchase two goods, e-books and sports tickets. Each e-book costs $10, and each ticket costs $15.
(Scenario: E-Books and Sports Tickets) Read the scenario E-Books and Sports Tickets. Measure e-books on the horizontal axis and sports tickets on the vertical axis. Suppose the price of e-books decreases. Holding everything else constant, Phillip's budget line has become _____, and his optimal consumption bundle will be on a _____ indifference curve.
A) flatter; higher
B) steeper; lower
C) flatter; lower
D) steeper; higher
Q:
The ratio of the prices of two goods is equal to the ratio of the marginal utilities of the two goods at:
A) the vertical intercept of the budget line.
B) the optimal consumption bundle.
C) the horizontal intercept of the budget line.
D) the intersection of the budget line with the highest indifference curve.
Q:
Figure: Oreos and Apples (Figure: Oreos and Apples) Look at the figure Oreos and Apples, which provides an indifference curve map for Diego. Diego prefers:
A) E to F.
B) F to E.
C) A to E.
D) D to C.
Q:
Figure: Oreos and Apples (Figure: Oreos and Apples) Look at the figure Oreos and Apples, which provides an indifference curve map for Diego. The consumption bundle that provides the highest level of utility is bundle:
A) A or C.
B) B or D.
C) E or F.
D) A or B.
Q:
Mallory consumes a bundle of candy and cookies, spending all of her income. The price of candy is $1 and the price of a cookie is $0.50. At her current bundle, the marginal utility of the next bar of candy she could purchase is 12 utils and the marginal utility of the next cookie she could purchase is 6 utils. Should Mallory consume more cookies or more candy, or should she leave her consumption unchanged?
Q:
A Giffen good is an inferior good for which the income effect dominates the substitution effect. A)
True B)
False
Q:
At the video store, Lucian narrows his selection to either a $2 videocassette of The Evil Dead or a $4 DVD of Finding Nemo. Lucian finally flips a coin to decide which movie to rent. This must mean that Lucian's marginal rate of substitution of The Evil Dead for Finding Nemo is 0.5. A)
True B)
False
Q:
Shirley knows her marginal rate of substitution of mangoes for bananas is equal to 3. The price of bananas is $0.50 and the price of mangoes is $1.00. Shirley should buy more mangoes. A)
True B)
False
Q:
The following bundles can all be on the same indifference curve. Bundle A: 4 enchiladas, 1 burrito; bundle B: 3 enchiladas, 3 burritos; bundle C: 2 enchiladas, 2 burritos. A)
True B)
False
Q:
If two variables are positively related:
A) as one goes up in value, the other must go up in value, too.
B) as one goes up in value, the other must go down in value.
C) there is always a trade-off between the two.
D) one variable is always the reciprocal of the other.
Q:
If two variables are positively related, on a graph they will always be represented by:
A) a line or curve that slopes downward.
B) a straight line.
C) a horizontal line.
D) a line or curve that slopes upward.
Q:
The owner of the Dismal Philosopher, one of the five bookstores on College Road, asks you to make a graph showing each College Road bookstore's share of all five stores' book purchases. A good way to show this information is with a pie chart. A)
True B)
False
Q:
A scatter diagram shows:
A) how far apart dependent variables are.
B) individual points of data showing both variable values.
C) the slope of a line.
D) the intercept of a curve.
Q:
Figure: Unemployment Rate over Time (Figure: Unemployment Rate over Time) Look at the figure Unemployment Rate over Time. In the time-series graph, as we move from 1997 to 2001, we see that the unemployment rate has _____ from approximately _____ to approximately _____.
A) decreased; 5%; 4%
B) increased; 5.3%; 7.3%
C) decreased; 7.8%; 5.5%
D) increased; 4%; 6.3%
Q:
Figure: Unemployment Rate over Time (Figure: Unemployment Rate over Time) Look at the figure Unemployment Rate over Time. In the time-series graph, as we move from 1993 to 1995, we see that the unemployment rate has _____ from approximately _____ to approximately _____.
A) decreased; 5%; 4%
B) increased; 5.3%; 7.3%
C) decreased; 7%; 5.5%
D) increased; 4%; 6.3%
Q:
The owner of the Dismal Philosopher, one of five bookstores on College Road, asks you to make a graph showing each College Road bookstore's share of all five stores' book purchases. The best way to show this information is with:
A) a scatter diagram.
B) a pie chart.
C) a time-series graph.
D) an independent graph.
Q:
Figure: Seasonally Adjusted Unemployment Rate (Figure: Seasonally Adjusted Unemployment Rate) Look at the figure Seasonally Adjusted Unemployment Rate. The distance between each labeled point on the horizontal axis is one year. Unemployment was ______ between 1/2001 and 1/2002 and ______ between 1/1999 and 1/2000.
A) increasing; decreasing
B) increasing; increasing
C) decreasing; increasing
D) decreasing; decreasing
Q:
(Table: Price, Quantity Demanded, and Quantity Supplied) Look at the table Price, Quantity Demanded, and Quantity Supplied. A straight line represents the relation between:
A) price and quantity demanded.
B) price and quantity supplied.
C) price and quantity demanded minus quantity supplied.
D) quantity demanded and quantity supplied.
Q:
The ratio of the change in the variable on the vertical axis to the change in the variable on the horizontal axis, measured between two points on the curve, is the:
A) axis.
B) slope.
C) dependent variable.
D) independent variable.
Q:
Figure: Slope (Figure: Slope) Look at the figure Slope. The slope of the line in the graph can be calculated by:
A) dividing the horizontal change by the vertical change.
B) dividing the vertical change by the horizontal change.
C) subtracting the sum of the Y values from the sum of the X values.
D) adding the sum of the X values to the sum of the Y values.
Q:
The slope of a straight line is the ratio of the:
A) vertical change to the horizontal change.
B) horizontal change to the vertical change.
C) run over the rise.
D) vertical change to the horizontal change, and it must be positive.
Q:
Figure: Demand and Supply (Figure: Demand and Supply) Look at the figure Demand and Supply. The slope of the curve labeled D is:A) -1.B) 0.C) 1.D) 3.
Q:
(Table: Wages and Hours Worked) Look at the table Wages and Hours Worked. Graphing the relation with wages on the vertical axis and hours worked on the horizontal axis, the slope between point D and point E is:
A) 0.5.
B) 5.
C) 45.
D) 2.
Q:
Figure: Illustrating Slope (Figure: Illustrating Slope) Look at the figure Illustrating Slope. In the graph, line 3 depicts X and Y to be:
A) positively related.
B) unrelated.
C) negatively related.
D) both constants.
Q:
Figure: Illustrating Slope (Figure: Illustrating Slope) Look at the figure Illustrating Slope. In the graph, line 1 depicts X and Y to be:
A) positively related.
B) nonlinearly related.
C) unrelated.
D) negatively related.
Q:
(Table: Choice with Uncertainty) Look at the table Choice with Uncertainty. Suppose the probability that the sitcom does not make it to television is 30%, that it makes it to television but is not the most viewed show in its time slot is 50%, and that it makes it to television and is the most viewed show in its time slot is 20%. Given this information, Norman's expected total utility is _____ utils.A) 2,000B) 2,150C) 2,350D) 2,650
Q:
(Table: Choice with Uncertainty) Look at the table Choice with Uncertainty. Suppose the probability that the sitcom does not make it to television is 50%, that it makes it to television but is not the most viewed show in its time slot is 30%, and that it makes it to television and is the most viewed show in its time slot is 20%. Given this information, Norman, as a utility maximizer:A) should keep his teaching job.B) should quit his teaching job and go to Hollywood.C) will be indifferent between leaving and staying, because his expected income is the same whether he stays a teacher or moves to Hollywood.D) will be indifferent between leaving and staying, because his expected total utility is the same whether he stays a teacher or moves to Hollywood.
Q:
(Table: Natasha's Total Utility) Look at the table Natasha's Total Utility. Natasha earns $50,000 per year but faces losing $20,000 of it if she is late with her work. If there is a 25% probability that Natasha will be late with her work and her income will then equal $30,000, her expected income is:
A) $32,500.
B) $38,200.
C) $40,500.
D) $45,000.
Q:
(Table: Income and Utility for Tyler) The table Income and Utility for Tyler shows the utility Tyler receives at various income levels, but she does not know what her income will be next year. There is a 40% chance her income will be $20,000, a 40% chance her income will be $30,000, and a 20% chance her income will be $40,000. What is her expected utility in utils?A) 3,270B) 3,144C) 3,420D) 3,480