In the Utility Maximizing Model, Consumer Preferences Are Assumed to Be

question 170

Multiple Choice

In the utility maximizing model, consumer preferences are assumed to be transitive.What does this mean?

• A)that consumers prefer more of a good to less
• B)that consumers have the freedom to change their preferences from time to time
• C)that consumers have preferences that are relatively consistent in the time period under consideration
• D)that consumers go through cycles in their consumption behavior

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Definitions:

Average Product

The output per unit of a particular input, such as labor or capital.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one good for another.

Wage Increase

An upward adjustment in the salary or earnings paid to an employee.

Utility Maximizing

Acting in a way to achieve the highest level of satisfaction possible with available resources.