Exhibit 6A-3 Consumer Equilibrium

question 163

Multiple Choice

Exhibit 6A-3 Consumer equilibrium
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Given the budget line and indifference curves shown in Exhibit 6A-3, point V is:

• A) inferior to point X.
• B) lowest attainable level of total utility.
• C) unobtainable.
• D) consumer equilibrium.

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Definitions:

Long-run Average Total Cost

The cost per unit of output in which all inputs, including capital, are variable, showing economies and diseconomies of scale over time.

Increasing Returns to Scale

A situation in which a proportional increase in all inputs results in a more than proportional increase in output, demonstrating economies of scale.

Law of Diminishing Returns

An economic principle stating that, holding all else constant, as one input variable is increased, there is a point at which the marginal per unit output starts decreasing.