Which of the Following Claims Is True at Each Point

question 110

Multiple Choice

Which of the following claims is true at each point along a price-consumption curve?

• A) Utility is maximized but income is not all spent.
• B) All income is spent, but utility is not maximized.
• C) Utility is maximized, and all income is spent.
• D) The level of utility is constant.

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Definitions:

Diseconomies of Scale

The phenomenon where an increase in production leads to higher costs per unit due to inefficiencies that arise from scaling up operations.

Increasing Returns

An increase in a firm’s output by a larger percentage than the percentage increase in its inputs.

Diminishing Returns

A principle stating that after a certain point, additional investment or effort yields progressively smaller increases in output.

Marginal-cost Curve

The marginal-cost curve represents how the cost of producing one additional unit of a good changes as its production volume varies.