Suppose Arun Consumes Only 2 Goods - Books and CDs

question 120

Multiple Choice

Suppose Arun consumes only 2 goods - books and CDs - and has a set of downward sloping indifference curves.As Arun moves from one point to another on a particular indifference curve,

• A)the combination of books and CDs will vary,but the level of utility remains constant.
• B)the combination of books and CDs that Arun prefers will remain constant,but the level of satisfaction will vary.
• C)the combination of books and CDs and Arun's income level will remain constant.
• D)Arun's level of satisfaction will vary as the combinations of books and CDs varies.
• E)Arun is consuming the same combination of goods,but with varying levels of income.

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Definitions:

Economic Rent

Income derived from the possession of a unique resource, exceeding that which is needed to keep the resource in its current employment.

Economic Profit

The profit from producing goods and services while considering both explicit and implicit costs, including opportunity costs.

Producer Surplus

The gap between the price that sellers are prepared to accept for a product and the real price it sells for in the market.

Total Variable Costs

The total of all costs that vary with the level of production or output.