Which of the Following Statements About the Optimal Solution to the Consumer

question 23

Multiple Choice

Which of the following statements about the optimal solution to the consumer problem based on the Cobb-Douglas utility function is NOT true?

• A) The cross-price elasticities of demand are zero.
• B) Both goods have downward sloping demand curves.
• C) Both goods are normal goods.
• D) The marginal utility of income may be negative.

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Definitions:

Textbook Price

The financial cost associated with purchasing academic textbooks, often noted for being significantly high.

Correlation Coefficient

A statistical measure that calculates the strength and direction of a linear relationship between two quantitative variables.

Negative Correlation

A relationship between two variables in which one variable increases as the other decreases, and vice versa, indicating an inverse relationship.

Interest Rates

The cost of borrowing money, expressed as a percentage of the amount borrowed, paid by the borrower to the lender for the use of funds.