QUIZ-III-ECO-3203-F2003-sola

D the original amount lent answer c 6 the consumers

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Unformatted text preview: the second period. d) the original amount lent. Answer: (c) 6) The consumer’s lifetime budget constraint states that a) the present value of lifetime consumption must be equal to the present value of gross income. b) the present value of lifetime consumption must be equal to the present value of disposable income. c) the present value of lifetime consumption plus the present value of lifetime taxes to be paid must be equal to the present value of income. d) the present value of lifetime taxes to be paid by the consumer must be equal to the present value of government spending. Answer: (b) 7) The endowment point is the consumption bundle in which a) first-period consumption is equal to zero. b) second-period consumption is equal to zero. c) the consumer finds the most utility. 2 d) consumption is equal to disposable income in each period. Answer: (d) 8) To assure a well-defined solution to the consumers’ intertemporal choice problems, we must assume that consumers’ preferences exhibit the properties that a) they are all identical and that more is always preferred to less. b) more is preferred to less and that the consumer prefers diversity. c) the consumer likes diversity and that more is sometimes preferred to less. d) more is sometimes preferred to less and that first-period consumption and second-period consumption are both normal goods. Answer: (b) 9) We assume that the representative consumer’s preferences exhibit the properties that a) they are convex and that more is always preferred to less. b) more is always preferred to less and that each consumer has one strictly favorite period of time for consumption. c) each consumer has one strictly preferred has one strictly favorite period of time for consumption and that current and future consumption are both normal goods. d) that current and future consumption are both normal goods and that the consumer likes diversity in his or her consumption bundle. Answer: (d) 10) The property of diminishing marginal rate of substitution follows from the property that the indifference curves are a) downward sloping. b) upward sloping. c)...
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This document was uploaded on 03/03/2014.

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