| 1. |
A consumer reaches the point of equilibrium when; |
| A. | MRSxy>Px/Py |
| B. | MRSxy < Px/Py |
| C. | MRSxy=Px/Py |
| D. | MRSxy=Px/Py=MU/TU |
| Answer» C. MRSxy=Px/Py | |
| 2. |
A consumer will start buying less of good- X and more of Good-Y, when |
| A. | MUx/Px = MUm |
| B. | MUx/Px < MUy/Py |
| C. | MUy/Py = MUm |
| D. | MUx/Px>MUy/Py |
| Answer» B. MUx/Px < MUy/Py | |
| 3. |
The slope of indifference curve is equal to: |
| A. | One |
| B. | marginal rate of substitution |
| C. | Marginal utility |
| D. | zero |
| Answer» B. marginal rate of substitution | |
| 4. |
Why is indifference curve convex to origin? |
| A. | Due to law of diminishing marginal utility |
| B. | Due to monotonic preferences |
| C. | Due to continuous decline of |
| D. | Both a and b |
| Answer» C. Due to continuous decline of | |
| 5. |
Which of the following is not the property of indifference curve: |
| A. | Higher the indifference curves higher the level of satisfaction |
| B. | Two indifference curves cannot intersect each other |
| C. | Indifference curve is concave to origin |
| D. | Indifference curve is downward sloping |
| Answer» C. Indifference curve is concave to origin | |
| 6. |
Hicks and Allen believed that utility: |
| A. | Cannot be measured |
| B. | Cannot be expressed |
| C. | Can be measured in cardinal |
| D. | Can be measured in ordinal numbers |
| Answer» D. Can be measured in ordinal numbers | |
| 7. |
An indifference curve is related to: |
| A. | Consumer’s income |
| B. | prices of goods X and Y |
| C. | Total utility from goods X and Y |
| D. | choices and preferences of consumer |
| Answer» D. choices and preferences of consumer | |
| 8. |
A shift in budget line, when prices are constant, is due to: |
| A. | change in demand |
| B. | change in income |
| C. | change in preferences |
| D. | change in utility |
| Answer» B. change in income | |
| 9. |
In case of normal goods, demand curve shows: |
| A. | a negative slope |
| B. | a positive slope |
| C. | zero slope |
| D. | none of these |
| Answer» A. a negative slope | |
| 10. |
Law of demand must fail in case of: |
| A. | normal good |
| B. | giffen goods |
| C. | inferior goods |
| D. | none of these |
| Answer» B. giffen goods | |
| 11. |
Inferior goods are those whose income effect is: |
| A. | negative |
| B. | positive |
| C. | zero |
| D. | none of these |
| Answer» A. negative | |
| 12. |
Which of the following pairs represents substitute goods? |
| A. | car and petrol |
| B. | juice and cold drink |
| C. | bread and butter |
| D. | all of these |
| Answer» B. juice and cold drink | |
| 13. |
Substitution effect takes place when price of the commodity becomes: |
| A. | relatively cheaper |
| B. | relatively dearer |
| C. | stable |
| D. | both (a) and (b) |
| Answer» D. both (a) and (b) | |
| 14. |
Total utility is |
| A. | The sum total of marginal utilities |
| B. | total level of satisfaction |
| C. | Increases at a diminishing rate |
| D. | All the above |
| Answer» D. All the above | |
| 15. |
Which of the following is called gossans first law |
| A. | Law of substitution |
| B. | Law of equi marginal utility |
| C. | Law of diminishing |
| D. | None of the above |
| Answer» C. Law of diminishing | |
| 16. |
Other things being equal a decrease in demand can be caused by |
| A. | A fall in price of the commodity |
| B. | A fall in income of the consumer |
| C. | A rise in price of the substitute |
| D. | None of these |
| Answer» B. A fall in income of the consumer | |
| 17. |
“Utility or satisfaction is a subjective concept; therefore it could only be ranked”. The statement supports |
| A. | Cardinal utility theorist |
| B. | Ordinal utility theorist |
| C. | Behavioral theorist of the firm |
| D. | None of the above |
| Answer» B. Ordinal utility theorist | |
| 18. |
The basic doctrine of consumers surplus is based on |
| A. | Indifference curve analysis |
| B. | Revealed preference theory |
| C. | Law of substitution |
| D. | Law of diminishing marginal utility |
| Answer» D. Law of diminishing marginal utility | |
| 19. |
Indifference curve is always |
| A. | Concave to the origin |
| B. | Convex to the |
| C. | L shaped |
| D. | A straight line |
| Answer» B. Convex to the | |
| 20. |
Engel curve for giffen good is |
| A. | Positively sloped |
| B. | Negatively sloped |
| C. | Horizontal straight line |
| D. | Vertical straight line |
| Answer» B. Negatively sloped | |
| 21. |
Price effect is |
| A. | Income effect – substitution effect |
| B. | Substitution effect – income effect |
| C. | Income effect + substitution |
| D. | Income effect + substitution effect- |
| Answer» C. Income effect + substitution | |
| 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. |
Revealed preference theory assumes |
| A. | SARP |
| B. | WARP |
| C. | Both A and B |
| D. | None of the above |
| Answer» B. WARP | |
| 24. |
Income consumption curve of an inferior commodity is |
| A. | Positively sloped |
| B. | Backward bending |
| C. | Downward slopping straight |
| D. | Showing constant income effect |
| Answer» B. Backward bending | |
| 25. |
In case of a convex indifference curve |
| A. | MRS xy is constant |
| B. | MRS xy is increasing |
| C. | MRS xy is negligible |
| D. | MRS xy is diminishing |
| Answer» D. MRS xy is diminishing | |
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