Economics: The Basics 1st Edition by Mike Mandel

Exercise 1

Say whether each of the following statements is true or false.
a) Everyone has the same utility function.
b) Diminishing marginal utility means that your utility gets smaller over time.
c) A budget constraint tells you what combinations of goods and services are feasible.
d) A rational individual will choose goods and services to maximize cost.
e) Intertemporal utility maximization involves a trade-off between consumption today and consumption in the future.
f) The discount factor is always between 1 and 2.
g) The price elasticity of demand is the percentage change in quantity supplied for a 1 percent change in price.
h) Consumer surplus measures the improvement in welfare from being able to participate in a market.
i) Cost minimization is the process of figuring out the least expensive way of producing a given amount of output.
j) Two inputs are substitutes if when the price of one goes up, a cost-minimizing business will use less of the other.
k) Supply is inelastic if the price elasticity of supply is less than 1.
l) In a market where demand is inelastic and supply is elastic, the burden of a tax is felt more by purchasers.