Question : Statement 1: The consumer's equilibrium is achieved when the budget line is steeper than the highest attainable indifference curve.
Statement 2: The consumer's equilibrium is determined by the intersection of the budget line and the highest attainable indifference curve.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Correct Answer: Statement 1 is false, and statement 2 is true.
Solution : The correct answer is (b) Option B: Statement 1 is false, and statement 2 is true.
Statement 1 is false. The consumer's equilibrium is not achieved when the budget line is steeper than the highest attainable indifference curve. In fact, the budget line should be tangent to the highest attainable indifference curve at the point of consumer equilibrium.
Statement 2 is true. The consumer's equilibrium is determined by the intersection of the budget line and the highest attainable indifference curve. At this point, the consumer maximizes their utility given their budget constraint by choosing the consumption bundle where the marginal rate of substitution (MRS) equals the relative price of the goods, which is represented by the slope of the budget line.
Question : Statement 1: Indifference curves represent different combinations of goods that give the consumer the same level of satisfaction.
Statement 2: The consumer chooses the consumption bundle that lies on the highest attainable indifference curve.
Question : Statement 1: An individual's indifference curve is concave to the origin.
Statement 2: The concavity of indifference curves reflects the diminishing marginal rate of substitution.
Question : Statement 1: The concept of consumer equilibrium assumes that the consumer has perfect information about prices and product attributes.
Statement 2: The consumer's equilibrium is based on rational decision-making and the pursuit of maximum satisfaction.
Question : Statement 1: A consumer achieves equilibrium by consuming equal quantities of all goods.
Statement 2: The concept of consumer equilibrium assumes that the consumer's goal is to maximize their total utility.
Question : Statement 1: The concept of consumer equilibrium can occur at multiple points of tangency between the budget line and indifference curves.
Statement 2: The consumer can achieve the same level of utility by choosing different combinations of goods that are equally preferable.
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