Economics Paper 13

The curve that is traced out when we keep indifference curves and the total effective budget constant and only change the relative price of good X (i.e. slope of budget line) is:

If the income and substitution effects of a price increase work in the same direction the good whose price has changed is a

If the price (or budget) line has a slope of -2 and it cuts indifference curve ICa at points P and R (given that the slope of ICa at point P is -4 and at point R is -1), the consumer can maximize utility by:

Indifference curves cannot

The main problem with marginal utility analysis is:

This question is about the demand for washing machines under uncertainty about whether the machine will turn out to be a good buy or a bad one. The odds ratio (OR) is defined as the ratio of the probability of the machine being good to the probability of the machine being bad. Let’s say the OR is < 1, and the consumer does not buy the machine. What can you conclude about the consumer ’s attitude towards risk?

The concept of diminishing marginal utility of income (DMUy) helps explain:

“Moral hazard” and “adverse selection” are problems related to asymmetric information, that arise

Profit- maximizing firms want to maximize the difference between

Which statement is FALSE?