Diminishing Marginal Rate of Substitution Implies That Indifference Curves Are

question 163

Multiple Choice

Diminishing marginal rate of substitution implies that indifference curves are:

• A) convex from the origin.
• B) concave from the origin.
• C) either convex or concave from the origin.
• D) straight line.

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Definitions:

Accounting Profit

The total revenue of a business minus its explicit costs, not including opportunity costs.

Opportunity Cost

The opportunity cost of an alternative is the profit you give up to pursue it.

Interest Payments

The amount paid by a borrower to a lender as compensation for the use of borrowed funds, usually calculated as a percentage of the principal amount.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits that could have been received but were given up.