Indifference Theory Is Based on the Assumption That

question 77

Multiple Choice

Indifference theory is based on the assumption that

• A)consumers are not able to rank consumption bundles in order of preference.
• B)consumers can always say which of two consumption bundles they prefer without having to say by how much they prefer it.
• C)the consumer has equated the marginal utilities of all products,and is therefore indifferent between consumption bundles.
• D)the consumer is able to quantify the difference in total utility received from two different consumption bundles.
• E)the consumer receives the same utility and is therefore indifferent between any two consumption bundles.

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Definitions:

Centered

In statistics, adjusting data values by subtracting the mean of the data set from each value to have an average of zero.

Perfect Substitute

Goods or services that can be used in exactly the same way and are considered interchangeable by the consumer.

Indifference Curve

A graph representing combinations of two goods that provide an individual with the same level of satisfaction and utility.

Convex Preferences

A situation in consumer theory where a consumer prefers combinations or mixtures of goods to extreme amounts of either good, illustrating a desire for diversified consumption.