McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Arts in Economics (BA Economics) .
| 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 | |
| 26. |
Hicks Allen indifference theory is based on |
| A. | weak ordering |
| B. | strong ordering |
| C. | constant ordering |
| D. | multiple ordering |
| Answer» A. weak ordering | |
| 27. |
Income consumption curve of an inferior commodity is |
| A. | positively sloped |
| B. | backward bending |
| C. | downward slopping straight line |
| D. | showing constant income effect |
| Answer» B. backward bending | |
| 28. |
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 | |
| 29. |
‘Higher the indifference curve higher will be level of satisfaction’. The statement is |
| A. | always true |
| B. | always false |
| C. | sometimes true and sometimes false |
| D. | true only if price effect is positive |
| Answer» A. always true | |
| 30. |
As per indifference curve analysis, consumer always try to reach |
| A. | higher indifference |
| B. | lower indifference curve |
| C. | middle indifference curve |
| D. | lower income price line |
| Answer» A. higher indifference | |
| 31. |
Which method is used by Hicks to eliminate the income effect when price of a product is changed |
| A. | compensating variation in income |
| B. | the cost difference |
| C. | the over compensation effect |
| D. | substituting variation in price |
| Answer» A. compensating variation in income | |
| 32. |
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 | |
| 33. |
According to Marshall, The law of diminishing marginal utility |
| A. | applies on money in the manner in which it applies on commodity |
| B. | do not applies on money except bank money |
| C. | does not applies on bank money but applies on cash |
| D. | applies on all commodities except money |
| Answer» D. applies on all commodities except money | |
| 34. |
An indifference curve represent |
| A. | four commodities |
| B. | less than two commodities |
| C. | only two commodities |
| D. | only one commodity |
| Answer» C. only two commodities | |
| 35. |
Indifference curve is always |
| A. | concave to the origin |
| B. | convex to the origin |
| C. | l shaped |
| D. | a straight line |
| Answer» B. convex to the origin | |
| 36. |
Engel curve for giffen good is |
| A. | positively sloped |
| B. | negatively sloped |
| C. | horizontal straight line |
| D. | vertical straight line |
| Answer» B. negatively sloped | |
| 37. |
Marginal utility is |
| A. | always zero |
| B. | increases at a diminishing rate |
| C. | the utility derived from last unit |
| D. | all the above |
| Answer» C. the utility derived from last unit | |
| 38. |
Total utility is |
| A. | the sum total of marginal utilities |
| B. | entire utility derived from whole consumption |
| C. | increases at a diminishing rate |
| D. | all the above |
| Answer» D. all the above | |
| 39. |
When Total utility is increasing at an decreasing rate, marginal utility is |
| A. | constant |
| B. | negative |
| C. | increasing |
| D. | decreasing |
| Answer» D. decreasing | |
| 40. |
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 | |
| 41. |
When price of a product falls, more of it is purchased because of |
| A. | the substitution effect |
| B. | the income effect |
| C. | neither substitution effect nor income effect |
| D. | both the substitution and income effects |
| Answer» D. both the substitution and income effects | |
| 42. |
“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 | |
| 43. |
Ordinal utility analysis is otherwise known as |
| A. | gossens second law |
| B. | cardinality approach |
| C. | indifference curve analysis |
| D. | rationality approach |
| Answer» C. indifference curve analysis | |
| 44. |
Ordinal utility analysis Was developed by |
| A. | j.r.hicks & r.j.d. allen |
| B. | samualson |
| C. | marshall and jevons |
| D. | slutsky |
| Answer» A. j.r.hicks & r.j.d. allen | |
| 45. |
Total utility curve |
| A. | always rises |
| B. | first falls then rises |
| C. | always falls |
| D. | first rises and then falls after reaching its maximum |
| Answer» D. first rises and then falls after reaching its maximum | |
| 46. |
At saturation point MU of a commodity is |
| A. | positive |
| B. | negative |
| C. | zero |
| D. | increasing |
| Answer» C. zero | |
| 47. |
A consumer reaches equilibrium when |
| A. | marginal utility is equal to price |
| B. | marginal utility greater than price |
| C. | marginal utility less than price |
| D. | total utility is equal to price |
| Answer» A. marginal utility is equal to price | |
| 48. |
Marshalian cardinal utility analysis assumes |
| A. | marginal utility of money is zero |
| B. | marginal utility of money is decreasing |
| C. | marginal utility of money is increasing |
| D. | marginal utility of money is constant |
| Answer» D. marginal utility of money is constant | |
| 49. |
When individuals income rises (everything remain the same) his demand for a normal good |
| A. | rises |
| B. | falls |
| C. | remains the same |
| D. | negative |
| Answer» A. rises | |
| 50. |
When individuals income falls (everything remain the same) his demand for a normal good |
| A. | rises |
| B. | falls |
| C. | remains the same |
| D. | negative |
| Answer» B. falls | |
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