The Slope of the Budget Constraint

question 52

Multiple Choice

The slope of the budget constraint:

• A)changes as the marginal rate of substitution changes.
• B)is the ratio of the prices of the two goods.
• C)is the ratio of the budget to total utility.
• D)equals one, since the consumer can purchase any combination along the budget constraint.

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Definitions:

Trade Agreements

Formal arrangements between countries to regulate tariffs, quotas, and other trade restrictions to facilitate and encourage international trade.

Trade Barriers

Government-imposed regulations such as tariffs, quotas, and embargoes that restrict the free flow of goods and services between countries.

Efficiency Loss

Losses in economic efficiency that occur when equilibrium for a good or a service is not achieved or is not achievable.