ECON 312 EXAM 2 QUESTIONS WITH CORRECT ANSWERS

ECON 312 EXAM 2 QUESTIONS WITH CORRECT
ANSWERS

MRS (Marginal Rate of Substitution) - VERIFIED ANSWER-Shows how much of good y a consumer is
willing to give up for more good x

Slope of an indifference curve



Completeness - VERIFIED ANSWER-If A&B are in any two situations, 3 possibilities can be specified:

1. A is preferred to B

2. B is preferred to A

3. A and B are equally attractive



Transitivity - VERIFIED ANSWER-if "A is preferred to B" and "B is preferred to C" then "A is preferred
to C"



More is better - VERIFIED ANSWER-All else equal, more of a good is better than less



Marginal Rate of Transformation (MRT) - VERIFIED ANSWER-Rate at which goods can be traded for
one another in the marketplace



Interior solution - VERIFIED ANSWER-positive amounts of both goods



Corner solution - VERIFIED ANSWER-positive amount of one good and zero of the other



Price Consumption Curve (PCC) - VERIFIED ANSWER-line through optimal bundles a consumer would
consume at each price of a good when the price of the other good and income are held constant



Income Consumption Curve (ICC) - VERIFIED ANSWER-shows how consumption of both goods
increases as income increases