What Do the Income Effect, the Substitution Effect, and Diminishing

question 108

Multiple Choice

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

• A)All are required to explain the utility-maximizing position of a consumer.
• B)They are all empirically measurable.
• C)They all help explain the upsloping supply curve.
• D)They all help explain the downsloping demand curve.

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Definitions:

Salvage Value

The estimated value that an asset will realize upon its sale at the end of its useful life.

Internal Rate

The rate of return that makes the net present value of all cash flows from a particular project equal to zero.

Payback Period

The length of time that it takes for a project to fully recover its initial cost out of the net cash inflows that it generates.

Investment

Allocation of capital or resources to assets with the expectation of generating profit or income.