Suppose the Consumer's Indifference Curves Are Concave (I

question 7

Multiple Choice

Suppose the consumer's indifference curves are concave (i.e.,bowed away from the origin) instead of convex.In this situation,

• A) along an indifference curve,the marginal value of X is falling as more X and less Y is consumed.
• B) all baskets on the budget line give the consumer the same level of satisfaction.
• C) the marginal value of X must equal P_X/P_Y at the consumer's optimum.
• D) the consumer's optimum is always a corner solution.

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Definitions:

Profitability Index

The profitability index measures the relationship between the present value of future cash flows and the initial investment.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor.

Payback Method

An investment appraisal technique that calculates the amount of time required for an investment to generate cash flows sufficient to recover its initial cost.

Cash Inflows

Money or equivalent value received by a business, often from operations, investments, or financing activities.