| 1. |
Total utility is maximum when |
| A. | marginal utility is zero |
| B. | marginal utility is maximum |
| C. | marginal utility increases |
| D. | average utility is maximum |
| Answer» A. marginal utility is zero | |
| 2. |
Which of the following is called gossans first law |
| A. | law of substitution |
| B. | law of equi marginal utility |
| C. | law of diminishing marginal utility |
| D. | none of the above |
| Answer» C. law of diminishing marginal utility | |
| 3. |
When individuals income falls (everything remain the same) his demand for an inferior good |
| A. | rises |
| B. | falls |
| C. | remains the same |
| D. | we cannot say without additional information |
| Answer» A. rises | |
| 4. |
If negative income effect is greater than positive substitution effect : the product will be |
| A. | a normal good |
| B. | an inferior good |
| C. | a giffen good |
| D. | a complementary good |
| Answer» C. a giffen good | |
| 5. |
Which of the following statement is FALSE with regard to marginal utility |
| A. | marginal utility is the utility derived from last unit |
| B. | as consumption increases marginal utility goes on diminishing |
| C. | at saturation point marginal utility is zero |
| D. | marginal utility increases at a diminishing range |
| Answer» D. marginal utility increases at a diminishing range | |
| 6. |
According to Marshall consumer surplus is: |
| A. | total utility – marginal utility |
| B. | total utility + marginal utility |
| C. | total utility derived – price |
| D. | price – marginal utility |
| Answer» C. total utility derived – price | |
| 7. |
If both the products X & Y are normal goods |
| A. | slopes down towards right |
| B. | slopes up towards right |
| C. | slopes up towards left |
| D. | slopes down towards left |
| Answer» B. slopes up towards right | |
| 8. |
Which of the following statement is TRUE with regard to total utility |
| A. | total utility is the utility derived from last unit |
| B. | total utility increases at a diminishing range |
| C. | as consumption increases total utility goes on diminishing |
| D. | at saturation point total utility is negative |
| Answer» B. total utility increases at a diminishing range | |
| 9. |
If negative income effect is less than positive substitution effect : the product will be |
| A. | a normal good |
| B. | an inferior good |
| C. | a giffen good |
| D. | a complementary good |
| Answer» B. an inferior good | |
| 10. |
Which of the following statements is true |
| A. | hicksian substitution effect is greater than slutsky substitution effect |
| B. | slutsky substitution effect is greater than hicksian substitution effect |
| C. | hicksian substitution effect is same and equal to slutsky substitution effect |
| D. | hicksian substitution effect is the reverse of slutsky substitution effect |
| Answer» B. slutsky substitution effect is greater than hicksian substitution effect | |
| 11. |
According to Hicks substitution effect is |
| A. | the movement to a higher indifference curve |
| B. | the movement to a lower indifference curve |
| C. | the movement along an indifference curve |
| D. | the movement to a decreased consumption |
| Answer» C. the movement along an indifference curve | |
| 12. |
Strong ordering means |
| A. | absence of indifference |
| B. | presence of indifference |
| C. | no difference between different combinations |
| D. | none of the above |
| Answer» A. absence of indifference | |
| 13. |
In the fundamental theorem of consumption and to prove the law of demand, Samualson uses |
| A. | compensating variation in income |
| B. | the cost difference |
| C. | the over compensation effect |
| D. | substituting variation in price |
| Answer» C. the over compensation effect | |
| 14. |
If negative income effect is greater than positive substitution effect : price effect will be |
| A. | zero |
| B. | negative |
| C. | positive |
| D. | positive and greater than one |
| Answer» B. negative | |
| 15. |
As per indifference curve analysis consumer equilibrium is attained when |
| A. | slope of indifference curve is constant |
| B. | slopes of both indifference curve and income price line are equal |
| C. | slopes of both indifference curve and income price line are opposite |
| D. | both income price line and indifference curve are parallel. |
| Answer» B. slopes of both indifference curve and income price line are equal | |
| 16. |
The slope of a budget line is |
| A. | the satisfaction level of both the commodities |
| B. | the income level of the consumer |
| C. | the price ratio of both the commodities under consideration |
| D. | price level of a country |
| Answer» C. the price ratio of both the commodities under consideration | |
| 17. |
At the point of tangency the slope of indifference curve is |
| A. | differ from point to point |
| B. | is equal on the other side of the mid point |
| C. | is the same |
| D. | is increasing |
| Answer» C. is the same | |
| 18. |
The slope of a budget line throughout its length is |
| A. | the satisfaction level of both the commodities |
| B. | the income level of the consumer |
| C. | the price ratio of both the commodities under consideration |
| D. | price level of a country |
| Answer» C. the price ratio of both the commodities under consideration | |
| 19. |
The income effect for a commodity is |
| A. | is always positive |
| B. | is always negative |
| C. | depends upon price effect |
| D. | determines the nature of the commodity |
| Answer» D. determines the nature of the commodity | |
| 20. |
The substitution effect for a commodity is |
| A. | is always positive |
| B. | depends upon the nature of the commodity |
| C. | depends upon price effect |
| D. | sometimes negative and sometimes positive |
| Answer» A. is always positive | |
| 21. |
Price effect is |
| A. | income effect – substitution effect |
| B. | substitution effect – income effect |
| C. | income effect + substitution effect |
| D. | income effect + substitution effect- negative effects |
| Answer» C. income effect + substitution effect | |
| 22. |
For a giffen good, when price falls |
| A. | demand increases at a faster rate |
| B. | demand decreases |
| C. | demand remains constant |
| D. | demand curve has a negative slope |
| Answer» B. demand decreases | |
| 23. |
Inferior goods are the goods with |
| A. | falling income effect |
| B. | rising income effect |
| C. | negative income effect |
| D. | positive marshallian effects |
| Answer» C. negative income effect | |
| 24. |
Indifference curves are |
| A. | always parallel |
| B. | may be parallel |
| C. | may not be parallel |
| D. | both b and c |
| Answer» D. both b and c | |
| 25. |
Revealed preference theory assumes |
| A. | weak ordering |
| B. | strong ordering |
| C. | constant ordering |
| D. | multiple ordering |
| Answer» B. strong ordering | |
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