The Concept of Diminishing Marginal Rate of Substitution Indicates That

question 41

Multiple Choice

The concept of diminishing marginal rate of substitution indicates that

• A) along an indifference curve, a consumer prefers the consumption combinations moving to the northwest along the curve.
• B) individuals are willing to give up an increasing amount of good Y in order to obtain one more unit of good X as the consumption of good X increases.
• C) individuals are willing to give up a decreasing amount of good Y in order to obtain one more unit of good X as the consumption of good X increases.
• D) None of the above answers is correct.

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Definitions:

Uncollectible Accounts

Accounts receivable that are considered unlikely to be collected and thus written off as a bad debt expense.

Idle Cash

Idle cash refers to funds that are not currently invested, earning interest, or being used in operations, often representing missed opportunities.

Treasury Bills

Short-term government securities with maturities ranging from a few days to 52 weeks, often considered risk-free investments.

Commercial Paper

An unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable, and inventories.