Consider the Indifference Map Below

question 51

Multiple Choice

Consider the indifference map below.This map represents Larry's preferences over two goods,oranges and grapefruits.Larry:

• A) does not like oranges and will not eat them.
• B) gets greater utility from additional grapefruits, but not from additional oranges.
• C) prefers oranges to grapefruits.
• D) will always choose to consume equal amounts of oranges and grapefruits.
• E) will always choose to consume a combination of oranges and grapefruits.

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Definitions:

External Benefits

Positive effects experienced by third parties or the broader society as a result of an economic transaction or activity that are not reflected in market prices.

Market Demand Curve

A graphical representation showing the relationship between the price of a good and the total quantity demanded by all consumers in the market.

Positive Externality

A benefit that affects a party who did not choose to incur that benefit, often associated with public goods and services.

Free-Market Economy

An economic system where prices are determined by unrestricted competition between privately owned businesses without government intervention.