Asked by Branton Wallace on Jul 20, 2024
Verified
What does the negative slope of the utilities possibilities frontier imply?
A) Diminishing marginal utility
B) The only way to increase one person's utility is to decrease another person's utility.
C) Diminishing marginal rates of substitution
D) The only way to increase output of one good is to decrease output of another.
Utilities Possibilities Frontier
A graph that shows the maximum satisfaction levels of two or more agents in an economy based on the allocation of resources.
Marginal Utility
The change in satisfaction or utility an individual gains from consuming an additional unit of a good or service.
- Absorb the essential concepts of welfare economics, especially the utility possibilities frontier, and how it signals the efficient management of resources.
Verified Answer
EK
Ethan KassemJul 23, 2024
Final Answer :
B
Explanation :
The negative slope of the utilities possibilities frontier implies that in order to increase one person's utility, another person's utility must be decreased. This is because resources are limited and must be allocated among different individuals. Therefore, any increase in utility for one person must come at the expense of another person. This is the concept of opportunity cost.
Learning Objectives
- Absorb the essential concepts of welfare economics, especially the utility possibilities frontier, and how it signals the efficient management of resources.