Question

1. All of the following are properties of indifference curves except

a. Higher indifference curves are preferred to lower ones

b. Indifference curves do not cross

c. Indifference curves are bowed outward

d. None of the above

2. If two bundles of good satisfy a consumer equally well, the consumer is said to be

a. On her/his budget constraint

b. Indifferent between the bundles

c. In an equilibrium position

d. Optimally satisfied

3. The costs incurred even when no output is produced are called

a. Fixed costs

b. Variable costs

c. Marginal costs

d. Average costs

4. As you move down a convex/bowed indifference curve with Good A on the vertical axis and Good B on the horizontal axis, the value of marginal rate of substitution (MRS) will diminish

a. True

b. False

Answer 1

1. Since indifference curve is bowed inward(convex) not bowed outward.

Hence options C is not the property of the indifference curve.

Hence option C is the correct answer.

2.

When two bundle satisfy a consumer equally, then it is said that the consumer is indifference between the two bundle.

Hence option B is the correct answer.

3.

The cost which a firm incure when there is no production of output. It is fixed cost.

Hence option A is the correct answer.

4.

When we move from up toward down on the indifference curve, then marginal rate of substitution (MU of B/ MU of A) between good A and B will decrease because for producing a additional unit of B, large quantities of good A is sacrificed.

It means MRS will decrease.

Hence the given statement is true.