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Economics Theory of Consumer Behaviour – MCQ
1. The want satisfying power of a commodity is known as
(a) production
(b) supply
(c) consumption
(d) utility
Satisfying power of Want of a commodity is called utility.So, option (d) is correct.
2. Any activity directed towards the satisfaction of wants is called:
(a) production
(b) utility
(c) consumption
(d) all of these.
Any activity directed towards the satisfaction of wants is called consumption. So, option (c) is correct.
3. ‘The want satisfying power of a commodity’ is the definition of :
(a) supply
(b) necessity
(c) productivity
(d) utility.
Utility of a commodity is the want satisfying power. So, option (d) is correct.
4. Utility of a goods can be called as the ———-
(a) Ability to buy a goods
(b) The difference between what a consumer is willing to pay and actually pay
(c) The satisfaction a consumer derives from the consumption of a particular good
(d) the desire to consume a goods.
Utility means the satisfaction a consumer obtains from consumption of a particular goods. So, option (c) is correct.
5. Utility is measured in terms of
| (a) | Litre |
| (b) | Seconds |
| (c) | Utils |
| (d) | Utility is non measurable |
Measurement unit of utility is utils. So, option (c) is correct.
6. The sum of the utility derived from the consumption of each unit of a commodity consumed is known as
(a) total utility
(b) average utility
(c) unit utility
(d) none of the above.
Total utility is the sum total of the utility derived from the consumption of each unit of a commodity consumed. So, option (a) is correct.
7. After reaching the saturations point, additional unit of the commodity causes
(a) total utility to fall and marginal utility to become negative
(b) total utility and marginal utility both to increase
(c) total utility and marginal utility both to decrease
(d) None of these.
After reaching the saturation point, additional unit of the commodity (marginal utility) decreases. So, option (a) is correct.
8. When the marginal utility is zero, the
(a) A.U. is the maximum
(b) T.U. is the maximum
(c) M.U. is the maximum
(d) T.U. is the minimum.
Consumer reaches equilibrium point when marginal utility (MU) is zero. After crossing this point total utility (TU) starts to fall due to negative marginal utility. So, total utility (TU) is maximum when M.U. is zero. So, option (b) is correct.
9. The total utility that Ram derives after having 4 oranges is 20, whereas the total utility on consuming 5 oranges is 19. what is the marginal utility for 5th mango.
(a) 1
(b) 0
(c) -1
(d) ± 1.
Marginal utility of 5th mango = 19 – 20 = -1. So, option (c) is correct.
10. Additional utility derived by a consumer, by consuming one more unit of that commodity is called
(a) Total utility
(b) Marginal utility
(c) Average utility
(d) All of the above.
Marginal utility means additional utility obtained from consumption of additional unit of a commodity. So, option (b) is correct.
11. The total utility divided by the number of units consumed is known as
(a) Marginal utility
(b) average utility
(c) total utility
(d) all of the above.
Average utility = (Total utility/No. of units consumed). So, option (b) is correct.
12. Total utility is maximum when:
(a) Marginal utility is maximum
(b) Marginal utility is zero
(c) Average utility is maximum
(d) Average utility is one
Consumer enjoys maximum total utility when marginal utility is zero. So, option (b) is correct.
13. Marginal utility curve of a consumer is also his:
(a) ISO cost curve
(b) Average cost curve
(c) Supply curve
(d) Demand curve
Marginal utility curve of a consumer is also his demand curve. So, option (d) is correct.
14_________ curve first moves upwards then downwards
(a) marginal utility curve
(b) average utility curve
(c) total utility curve
(d) supply curve.
Total utility curve first moves upward. After reaching highest point, it moves downward. So, option (c) is correct.
15. The point of satiety means
(a) The point where marginal utility becomes greater than zero
(b) The point where marginal utility becomes less than zero
(c) The point where marginal utility becomes zero
(d) All of the above.
Point of satiety is the point where marginal utility becomes zero. If consumer consumes additional unit above point of satiety, he gets no extra utility. So, option (c) is correct.
16. Total utility curve
(a) always rises
(b) always declines
(c) first falls and then rises
(d) first rises at a increasing rate, then rises at a reducing rate and falls after reaching its maximum.
Total utility curve first rises at increasing rate, then rises at decreasing rate and then falls after reaching its maximum. So, option (d) is correct.
17. Which of the following laws says: “If a person has a product which can be put to several uses, he will distribute it among these uses in such a way that it has the same marginal utility”?
(a) Law of equi-marginal utility
(b) Law of diminishing marginal utility
(c) law of ordinal utility
(d) Law of increasing marginal return.
As per equi-marginal utility if a person has a product which can be put to several uses, he will distribute it among these uses in such a way that it has the same marginal utility. So, option (a) is correct.
18. What is the rate at which a consumer is willing to substitute one product for the maintaining the same level of utility.
(a) Increasing marginal utility
(b) Marginal rate of substitution
(c) Income effect
(d) Conversion rate.
Marginal rate of substitution is the rate at which one commodity is substituted by the other, provided the utility derived is constant. So, option (b) is correct.
19. Which of the following defines the difference between what the consumer is willing to pay for a product and what he actually pays.
(a) Consumer surplus
(b) Consumer burden
(c) Target price
(d) Price difference.
Consumer surplus = (what a consumer is ready to pay) – (what he actually pays). So, option (a) is correct.
20. Which of the following goods give the maximum amount of consumer surplus?
(a) Milk
(b) Camera
(c) Computer
(d) Water.
Water is essential for life. Consumer can pay any amount for water. But water generally available at free of cost. So, consumer surplus in case of water is highest. So, option (d) is correct.
21. If a buyer’s willingness to pay for a new car is Rs.2,30,000 and she is able to actually buy it for Rs.1,90,000 her consumer surplus is :
(a) Rs.1,90,000
(b) Rs.40,000
(c) Rs.2,30,000
(d) None of the above
Consumer surplus = (What a consumer is ready to pay) – (What a consumer actually pays)
So, buyer’s consumer surplus = 2,30,000 – 1,90,00 = 40,000. So, option (b) is correct.
22. If total utility of a commodity is 5 and marginal utility is 1, A person consumes 3 units. What is the consumer surplus?
(a) 5
(b) 7
(c) 1
(d) 2
What a consumer is ready to pay = Total utility = 5 utils
Actually pays for = Marginal utility x No. of units consumed = 1 x 3 = 3 utils. Hence Consumer surplus = 5-3 = 2 utils. So, option (d) is correct.
23. Which of the following represent the combinations of goods which give same satisfaction to the consumer.
(a) Marginal curve
(b) indifference curve
(c) Budget line
(d) All of the above.
Indifference curverepresent the combinations of goods which give same satisfaction to the consumer. So, option (b) is correct.
24. ——– shows various combination of two products that give same amount of satisfaction /2
(a) ISO product curve
(b) Indifference curve
(c) Marginal utility curve
(d) Equal product curve
Indifference curve shows various combinations of two products that give same amount of satisfaction. So, option (b) is correct.
25. Group of more than one ICs is called as:
(a) Budget line
(b) Linear IC
(c) Consumer equilibrium
(d) Indifference map
Indifference Map is group of multiple Indifference Curves. So, option (d) is correct.
26. An indifference curve is always:
(a) Concave to the origin
(b) Convex to the origin
(c) Bell shaped
(d) A vertical straight line
An indifference curve is always convex to the origin. So, option (b) is correct.
27. Indifference curve slopes——–
(a) Downward to the right
(b) Upward to the right
(c) Downward to the left
(d) Parallel to axis.
Indifference curve has negative slope i.e. it slopes downwards to the right because quantity of one commodity decreases, the quantity of the other must increase if consumer has to stay on same level of satisfaction. So, option (a) is correct.
28. At equilibrium, the slope of the indifference curve is:
(a) Equal to the slope of budget line
(b) Greater then the slope of budget line
(c) Smaller than the slope of budget line
(d) Any of the above
At equilibrium point the slope of the indifference curve is equal to the slope of budget line. So, option (a) is correct.
29. The consumer is in equilibrium at a point, budget line is :
(a) above an indifference curve
(b) below an indifference curve
(c) tangent to an indifference curve
(d) Horizontal to indifference curve.
The consumer is in equilibrium at a point where the budget line is tangent to an indifference curve. So, option (c) is correct.
30. Consumer’s equilibrium is :
(a) the position of rest or maximum satisfaction with given income and prices
(b) the position which the consumer cannot attain because his income is low
(c) the position of frequent movement in all directions
(d) All of the above
Consumer’s equilibrium means a position where consumer enjoys maximum satisfaction with given income and prices. So, option (a) is correct.
31. A consumer reaches equilibrium at the point where:
(a) MU = P
(b) MU > P
(c) MU < P
(d) TU < P
Consumer reaches equilibrium at the point where marginal utility (MU) equals to price (P). So, option (a) is correct.
32. A person will continue to pursue an activity up to point where
(a) Total benefit from that activity is equal to total cost of that activity
(b) average benefit from that activity is equal to average cost of that activity
(c) Marginal benefit from that activity is equal to zero
(d) marginal benefit from that activity is equal to marginal cost of that activity.
A person reaches equilibrium point when marginal utility = Marginal cost. So, a person will continue to pursue an activity upto the point where marginal benefit from that activity is equal to marginal cost of that activity.So, option (d) is correct.
33. The marginal utilities of Product X and Product Y, are 300 and 450 at equilibrium respectively. If the price of the product Y is Rs.60, what is the price of Product X at equilibrium?
(a) Rs.55
(b) Rs.75
(c) Rs.40
(d) Rs.60
When marginal utility 450 = price =60
When marginal utility 1 = price =(60/450). So, at marginal utility 300, price = [(60/450) x 300] = 40
Price of product X will be Rs.40/- . So, option (c) is correct.
34. If the prices of mango and apple are Rs.40 and Rs.30 respectively, and the marginal utility of apple is 150, what is the marginal utility of mango assuming that the consumer is at equilibrium?
(a) 250
(b) 160
(c) 200
(d) 230.
At Apple price 30, Marginal utility = 150. So, at price 1, Marginal utility of Apple = (150/30) =5, So, at Apple price 40, Marginal utility of Apple = 40×5= 200. At equilibrium, Marginal utility of mango will be 200. So, option (c) is correct.
35. As per law of diminishing returns, if more labour is employed, capital remaining in the same :
(a) The marginal productivity of labour is positive
(b) The marginal productivity of labour decreases initially but starts increasing after reaching a high.
(c) The marginal productivity of labour is negative
(d) The marginal productivity of labour will increase initially but start decreasing after reaching a high.
According to law of diminishing returns, if more labour is employed, capital remaining the same, the marginal productivity of labour will increase initially but start decreasing after reaching a high. So, option (d) is correct.
36. If all prices and money income is doubled, the consumer is- /2
(a) Better off
(b) Worse off
(c) Neither better off nor worse off
(d) All of these.
If all prices and money income is doubled, the consumer is neither better off nor worse off because there is no change in consumer’s purchasing power. So, option (c) is correct.
37. Indifference curves between income and leisure for an individual are generally: /4
(a) Horizontal
(b) Convex to the origin
(c) Negatively sloped straight lines
(d) Positively sloped straight lines
Indifference curves between income leisure for an individual are generally positively sloped straight lines. So, option (d) is correct.
38. In case of a right angled indifference curve, the goods are: /3
(a) Perfect complements
(b) Perfect substitutes
(c) Inferior goods
(d) Necessities
In case of perfect complements, indifference curve is right angled. So, option (a) is correct.
39. A consumer buys two commodities X and Y, he would be in equilibrium when: /3
(a) MUx / Px = MUy / Py
(b) MUx / MUy = MUm
(c) MUx / Px = (MUy / Px) x 2
(d) Px / Py = Mum x MUy
Consumer will be in equilibrium if MUx / Px = MUy / Py. So, option (a) is correct.
