5. Which of the following best describes consumer choice? a) The consumer buys w

Question

5. Which of the following best describes consumer choice?

a) The consumer buys whatever is possible

b) The consumer maximizes utility subject to his/her budget constraint

c) The consumer buys whatever is preferred

d) The consumer reallocates according to the constraint.

6. Which of the following is determined by consumer choice?

a) Technology

b) Supply Curve

c) Demand Curve

d) Marginal Cost

7. The utility of a consumer is best shown on a two-dimensional graph by which of the following?

a) Production Function

b) “Typical-looking” cost curves

c) Equilibrium price and quantity in the market

d) Indifference curves

8. A budget constraint is best described as a curve that shows:

a) The combinations of goods that a consumer can afford

b) The limits on income of the consumer

c) The line that connects quantities for the consumer

d) Demand in the market

Explanation / Answer

5.

A consumer chooses those bundles of goods which maximises his utility given his budget constraint. On the graph, it will be at a point where Indifference curve is tangent on the budget constraint.

Hence The consumer maximizes utility subject to his/her budget constraint best describes consumer choice.

Therefore option b is the correct answer.

(6)

A consumer chooses those bundles of goods which maximises his utility given his budget constraint. It means the curve best describes the consumer choice is demand curve because the demand curve shows the maximum willingness to pay at different prices.

Hence option c is the correct answer.

(7)

The utility of a consumer is best shown on a two-dimensional graph by Indifference curves. This is because the indifference curve shows an indifference curve is a graph which shows the different combination of two goods that give the consumer equal utility.

Hence option d is the correct answer.

(8)

A budget constraint is best described as a curve that shows the combinations of goods that a consumer can buy with his given income.

Hence option a is the correct answer.

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