362PS02 - Problem Set 2 Econ 362 (01) Fall 2002 (Dr....

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Problem Set 2 Econ 362 (01) Fall 2002 (Dr. Tin-Chun Lin) 1. When the indifference curve is tangent to the budget constraint, (A) The consumer is likely to be at a sub-optimal level of consumption. (B) Indifference curves are likely to interest. (C) A consumer cannot be made better-off without increasing her current income. (D) Income is at its maximum for a consumer. (E) Utility is at its minimum for a consumer. (Answer: (C)) 2. An optimizing consumer will select a consumer bundle in which utility is maximized (A) And prices are minimized. (B) And income is maximized. (C) And income is minimized. (D) And indifference curves are linear. (E) Subject to constraints imposed by the budget. (Answer: (E)) 3. An optimizing consumer will select a consumption bundle in which the (A) Marginal rate of substitution is equal to income. (B) Marginal rate of substitution is larger than the relative price. (C) Marginal rate of substitution is equal to the relative price. (D) Ratio of expenditure shares equals the marginal rate of substitution. (E) Utility exceeds price.
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This note was uploaded on 10/30/2008 for the course ECON 001 taught by Professor Zarnowski during the Spring '08 term at Dartmouth.

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362PS02 - Problem Set 2 Econ 362 (01) Fall 2002 (Dr....

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