All of the following are assumptions of the production possibilities curve EXCEPT
A) resources are fully employed.
B) there is a fixed time period.
C) there is a fixed level of technology.
D) there is a fixed demand for the products.
Answer: D
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The movement of the budget line from BB to bb in the above figure suggests that income has:
A) increased and the price of X has decreased. B) fallen and the price of Y has increased. C) fallen and the price of X has decreased. D) decreased but there have been no price changes.
There are only two people in the world (Adam and Eve) and only one good (apples). Adam has four apples and a total utility in money terms from apple consumption of $16; Eve has four apples and a total utility from apple consumption of $20. Which of the following statements must be true?
A. Eve’s marginal utility from consuming her fourth apple must be greater than Adam’s marginal utility from consuming his fourth apple. B. The total utility of society will rise if Adam gives Eve one apple. C. If Adam and Eve each always has a positive marginal utility from consuming apples, the total utility of society can only be increased by an increase in the total number of apples available for consumption. D. Adam’s average utility from consuming apples is greater than Eve’s average utility from consuming apples.