A gift-giver's efficient number of gifts (to give to a gift-recipient)has fallen from 10 to 8. This could be because
A)the gift-giver's marginal benefit and marginal cost curves for giving gifts remained constant.
B)the gift-giver's marginal cost curve of giving gifts shifted up and leftward.
C)the gift-recipient "fell out" of the gift-giver's utility function.
D)the gift-giver's marginal cost curve of giving gifts shifted down and rightward.

Question

A gift-giver's efficient number of gifts (to give to a gift-recipient)has fallen from 10 to 8.  This could be because
A)the gift-giver's marginal benefit and marginal cost curves for giving gifts remained constant.
B)the gift-giver's marginal cost curve of giving gifts shifted up and leftward.
C)the gift-recipient "fell out" of the gift-giver's utility function.
D)the gift-giver's marginal cost curve of giving gifts shifted down and rightward.

Quizplus · Accepted Answer

If the gift-giver's efficient number of gifts has fallen, it means that the marginal cost of giving gifts has increased. A leftward shift of the marginal cost curve indicates that, to achieve the same efficient number of gifts, the gift-giver must now give up more resources, such as time and money, or obtain fewer benefits, such as gratitude and affection, from the gift-giving. Therefore, choice B is correct. Choice A is incorrect because it assumes that both curves remain unchanged, which is not the case here. Choice C is incorrect because it implies that the gift-recipient's preferences have changed, which is not given in the question. Choice D is incorrect because it suggests that the marginal cost of giving gifts has decreased, which contradicts the premise of the question.

A Gift-Giver's Efficient Number of Gifts (To Give to a Gift-Recipient)has