If Melissa is at her consumer equilibrium, which of the following statement is true?

1. i. Melissa is off of her budget line.
2. ii. Melissa is on her highest possible indifference curve.
3. iii. Melissa is dividing her budget equally across all goods.

Why do most demand curves have a negative slope?

1. Because consumers substitute higher quality goods for lower quality goods because of the substitution effect.
2. Because consumers try to substitute away from the consumption for a commodity when the commodity's price rises because of the substitution effect.
3. Because as prices increase firms will supply more goods to the market.

What will happen if a good that is normal has a decrease in price which causes a substitution effect?

1. It will cause a substitution effect that is positive and an income effect that is positive.
2. It will cause a substitution effect that is negative and an income effect that is positive.
3. The consumer will continue to purchase more of the lower-priced good until his/her budget is exhausted.

What must take place for a consumer to retain their original indifference curve trajectory in the presence of declining marginal rates of substitution when time after time a unit of a good is sacrificed for another good?

1. The consumer must receive compensation for ever-larger units of another good.
2. The consumer must receive compensation for ever smaller units of another good.

Rizwanur's favorite food is pretzels but he often doesn't know when to stop. After the sixth pretzel, he no longer receives any positive utility from consumption and starts to feel sick. Which of the following statements must be true?

1. His total utility is maximized when he eats the sixth pretzel.
2. Rizwanur's pretzel habit does not follow the principle of diminishing marginal utility.
3. According to the principle of diminishing marginal utility Rizwanur should stop eating after one pretzel.