Indifference Curves Are Convex to the Origin If

question 166

Multiple Choice

Indifference curves are convex to the origin if

• A)a person's marginal rate of substitution declines as he or she consumes more of a good.
• B)a person's marginal rate of substitution increases as he or she consumes more of a good.
• C)the law of diminishing marginal utility does not hold.
• D)a person's marginal rate of substitution rises as he or she consumes more of a good.

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Definitions:

Mixed Costs

Expenses that have both fixed and variable components, changing in total with activity level but not directly proportional.

Variable Costs

Variable costs are expenses that change in proportion to the activity or volume of a business, such as raw materials and labor costs that vary with production levels.

Contribution Margin

Contribution margin represents the difference between sales revenue and variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.

Sales Revenue

The total amount of money generated from the sale of goods or services before any costs or expenses are deducted.