Economics Lecture: Financial Obligations and Economic Tools
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Questions and Answers

What is the present discounted value (PDV) defined as?

  • The set of tools designed to analyze economic decision making
  • The value of future dollar amounts in future terms
  • The future obligations of the government recognized in the annual budget
  • The value of each period’s dollar amount in today’s terms (correct)

What is the utility function in constrained utility maximization?

  • The additional increment to utility obtained by consuming an additional unit of a good
  • The process of maximizing the well-being of an individual
  • A graphical representation of all bundles of goods that make an individual equally well off
  • A mathematical function representing an individual’s set of preferences (correct)

What is the purpose of empirical tools in the economic toolbox?

  • To analyze data and answer questions raised by theoretical analysis (correct)
  • To understand the mechanics behind economic decision making
  • To maximize the well-being (utility) of an individual
  • To represent reality through mathematical or graphical models

What are the key properties of indifference curves?

<p>Consumers prefer higher indifference curves (B)</p> Signup and view all the answers

What does marginal utility represent?

<p>The additional increment to utility obtained by consuming an additional unit of a good (A)</p> Signup and view all the answers

What does the concept of diminishing marginal utility suggest?

<p>Consuming more units of a good makes the individual less happy (B)</p> Signup and view all the answers

What does the rate at which a consumer is willing to trade one good for another represent?

<p>Marginal rate of substitution (D)</p> Signup and view all the answers

What does the budget constraint represent?

<p>Combinations of goods an individual can afford to buy if they spend their entire income (D)</p> Signup and view all the answers

What is the opportunity cost of a purchase?

<p>The next best alternative use of money (B)</p> Signup and view all the answers

What does an indifference curve represent?

<p>Combinations of goods that keep a consumer equally well off (C)</p> Signup and view all the answers

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