A Decreasing Marginal Rate of Substitution Indicates That an Indifference

question 320

Multiple Choice

A decreasing marginal rate of substitution indicates that an indifference curve is:

• A) a straight line.
• B) a vertical line.
• C) a horizontal line.
• D) bowed in toward the origin.

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Definitions:

Accounting Profits

The net income for a company after all expenses have been deducted from revenues, according to generally accepted accounting principles.

Implicit Costs

The opportunity costs of using resources owned by the company for its own operations, rather than earning income elsewhere.

Explicit Costs

Direct payments made to others in the course of running a business, such as wages, rent, and materials.

Implicit Costs

Costs that represent foregone opportunities, such as the income a business owner forgoes by investing in their own company instead of elsewhere.