A Consumer Has Preferences Over Two Goods,X and Y

question 114

Multiple Choice

A consumer has preferences over two goods,X and Y.Suppose we graph this consumer's preferences (which satisfy the usual properties of indifference curves) and budget constraint on a diagram with X on the horizontal axis and Y on the vertical axis.At the consumer's current consumption bundle,the consumer is spending all available income,and the marginal rate of substitution is less than the slope of the budget constraint.We can conclude that the consumer

• A) is currently maximizing satisfaction.
• B) could increase satisfaction by consuming more X and less Y.
• C) could increase satisfaction by consuming less X and more Y.
• D) could purchase more X and more Y and increase total satisfaction.

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Definitions:

Confidence

The degree to which one can be certain or believe in a finding, result, or proposition, often used in the context of statistical conclusions.

Random Sample

A sample drawn from a population where each member has an equal chance of being selected.

Least Squares Line

A regression line calculated by minimizing the sum of squares of the differences between observed and predicted values.

Weight

A measurement of the force exerted by gravity on an object, typically measured in pounds or kilograms.