Which of the following statement regarding indifference curves is correct? Indif
ID: 1140895 • Letter: W
Question
Which of the following statement regarding indifference curves is correct?
Indifference curves show all the possible combinations of goods which provide the same level of utilities.
They are useful to evaluate the marginal rate of transformation.
The less we consume the higher is the utility level since it means that we do not need materials good to be satisfied.
None of the above.
Indifference curves show all the possible combinations of goods which provide the same level of utilities.
They are useful to evaluate the marginal rate of transformation.
The less we consume the higher is the utility level since it means that we do not need materials good to be satisfied.
None of the above.
Explanation / Answer
Answer: Option a. Indifference curve shows all possible combinations goods which provide the same level of utility.
Explanation: People really can not give a numerical value to their level of satisfaction. However, they can and should identify the options that would give them more, less, or the same level of satisfaction. An indifference curve shows different combinations of products that offer the same level of utility or even satisfaction.
The marginal transformation rate (MRT) is the rate at which a good must be sacrificed to produce an additional unit (or marginal unit) of another good, assuming that both goods require the same rare inputs.The marginal transformation rate can be evaluated with the help of production possibility frontier.
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