Question

Question 1 1 pts A budget line shows: O consumption possibilities. o societal demands for goods. O unlimited income. 0 production possibilities.

Answer 1

1. A budget line shows the consumption possibilities of a consumer, given the income, and the price of the goods. Its equation is given by p₁x₁ + p₂x₂ = m. So the answer is consumption possibilities.

6.

Q	TU	MU
0	0	-
1	25	A = 25
2	B = 30 (=25+5)	5
3	53	C = 23 (= 53-30)
4	D = 63 (=53+10)	10
5	71	E = 8

Marginal utility is the change in total utility due to the consumption of one additional unit. For example, in the above table, when the consumer consumes 2 units instead of 1, 5 utils are added to the total utility. Proceeding in the similar manner, E = 8.

7. According to the marginal utility approach, there are gains associated from the increased consumption of a good. Therefore, the consumer is trying to maximize their utility, so they choose the that combination of goods that yield the highest possible utility. So the given statement is false.

10. Take a look at the graphical representation of total utility and marginal utility. Observe that when the marginal utility is positive, total utility is increasing, although at a decreasing rate. So the answer is when marginal utility is positive, total utility is rising.

TU (Total utility) "MU Marsenal utility