Micro_lecture_6

What is utility in economic terms?

• The cost of a good

• The satisfaction a consumer derives from consuming goods and services

• The quantity of goods consumed

• The profit from selling goods

Which term describes all goods and services consumed by an individual?

• Utility function

• Consumption bundle

• Budget line

• Indifference curve

What does the Law of Diminishing Marginal Utility state?

• Utility increases indefinitely with consumption

• Each additional unit of a good provides more satisfaction than the previous one

• Each additional unit of a good provides less additional satisfaction than the previous one

• Utility remains constant regardless of consumption

What is the budget constraint?

• The limit on spending based on an individual's income

• The maximum utility an individual can achieve

• The optimal point of utility on a graph

• The difference between income and expenses

An indifference curve shows:

• How utility decreases as income increases

• All consumption bundles with the same utility level

• How prices affect utility

• The marginal utility per dollar

If indifference curves are downward sloping, it indicates:

• More is better

• Goods are perfect substitutes

• Goods are perfect complements

• The budget is unlimited

According to consumer theory, what is the 'tangency condition'?

• When a budget line and an indifference curve intersect at one point

• When a consumer's income is exhausted

• When a consumer maximizes their utility

• When utility is equal to marginal cost

What does the slope of the budget line represent?

• Marginal utility per dollar

• Opportunity cost between two goods

• The income effect

• Total utility

Indifference curves that are farther from the origin represent:

• Lower levels of utility

• Higher levels of utility

• The same level of utility as curves closer to the origin

• No relation to utility levels

The marginal utility per dollar spent is:

• The additional utility obtained by consuming one more dollar of a good

• Total utility divided by income

• The utility increase when an additional dollar is spent on a good

• Total utility divided by quantity