The Consumption Function Is Based on a Number of Assumptions

question 136

Multiple Choice

The consumption function is based on a number of assumptions.Given these assumptions,which of the following statements is true?

• A)Below a certain level of income,APC > 1 and MPC < 0.
• B)The MPC and APC are always less than unity.
• C)As income rises,the MPC falls and the APC rises.
• D)The MPC is greater than zero and less than one,and the APC falls as income rises.
• E)The APC is greater than zero and less than one,and the MPC falls as income rises.

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Definitions:

Winner's Curse

A phenomenon where the winning bidder in an auction pays more than what the item is actually worth, often due to imperfect information.

Bidder Valuation

The process by which a bidder determines the maximum amount they are willing to pay for a good or service in an auction.

Estimated Valuation

An approximate calculation or judgment of the monetary value of a company, asset, or product.

Common-value Auction

An auction type where the item for sale is of the same value to all bidders, but that value is uncertain.