In a Budget Line/indifference Curve Diagram, at the Consumer Equilibrium

question 211

Multiple Choice

In a budget line/indifference curve diagram, at the consumer equilibrium

• A) any movement upward or downward on the budget line will move the consumer to a less preferred point.
• B) any movement to the northeast to higher indifference curves moves the consumer to a less preferred point.
• C) the slope of the budget line is as much larger as possible than the marginal rate of substitution.
• D) All of the above statements are correct.

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Definitions:

Borrow

The act of receiving funds from a lender under the agreement to return the principal amount plus interest or other charges.

Indifference EBIT

The earnings before interest and taxes level at which a company will have no preference between two or more financial actions due to equivalent financial outcomes.

Capital Structure

The combination of borrowing and ownership investment utilized by a business to finance its activities and expansion.

Shares Outstanding

The total number of shares of a company that have been issued and are held by shareholders, including shares held by the public as well as restricted shares owned by the company’s insiders.