A consumer's demand curve for a product is downsloping because:
A. total utility falls below marginal utility as more of a product is consumed.
B. marginal utility diminishes as more of a product is consumed.
C. time becomes less valuable as more of a product is consumed.
D. the income and substitution effects precisely offset each other.
Answer: B
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A one-year bond currently pays 5% interest. It's expected that it will pay 4.5% next year and 4% the following year. The two-year term premium is 0.2% while the three-year term premium is 0.35%
What is the interest rate on a two-year bond according to the liquidity premium theory? A) 4.5% B) 4.75% C) 4.95% D) 4.975%
Jeremy maximizes utility by consuming both iced tea and coffee. Iced tea is priced at $1.50 per bottle and coffee at $2.00 per 16-ounce cup. Which of the following marginal utility pairs is inconsistent with Jeremy's consumer equilibrium at these prices?
a. MU of iced tea = 3; MU of coffee = 4 b. MU of iced tea = 4; MU of coffee = 3 c. MU of iced tea = 6; MU of coffee = 8 d. MU of iced tea = 3/4; MU of coffee = 1