1.
In the indifference curve approach, consumer equilibrium is achieved when:
A)
B)
C)
D)
Answer: B
2.
Which of the following assumptions is not necessary for the ordinal utility approach?
A) Rational behaviour
B) Measurability of utility
C) Diminishing MRS
D) Transitivity of preferences
Answer: B
3.
The shape of an indifference curve showing perfect complements will be:
A) Downward-sloping straight line
B) Convex to the origin
C) L-shaped
D) Upward-sloping
Answer: C
4.
If a consumer’s income and all prices double, the budget line will:
A) Shift outward parallelly
B) Rotate about the origin
C) Remain unchanged
D) Become flatter
Answer: C
5.
The Law of Diminishing Marginal Utility forms the basis of:
A) Law of Demand
B) Law of Supply
C) Theory of Factor Pricing
D) Indifference Curve Analysis
Answer: A
6.
In Revealed Preference Theory, if a consumer chooses bundle A over B when both are affordable, it implies:
A) A is less preferred than B
B) A and B are equally preferred
C) A is revealed preferred to B
D) Prices are identical
Answer: C
7.
The slope of the budget line is equal to:
A)
B)
C)
D)
Answer: A
8.
The indifference curve is convex to the origin because of:
A) Increasing MRS
B) Constant MRS
C) Diminishing MRS
D) Negative utility
Answer: C
9.
A straight-line indifference curve indicates:
A) Perfect substitutes
B) Perfect complements
C) No relation between goods
D) Inferior goods
Answer: A
10.
If MRS diminishes at a decreasing rate, indifference curves will be:
A) Linear
B) Steeper than normal
C) More convex
D) Less convex
Answer: D
11.
Consumer Surplus is the:
A) Difference between total utility and total expenditure
B) Difference between marginal utility and price
C) Ratio of utility to price
D) Product of utility and price
Answer: A
12.
Who first introduced the concept of Consumer Surplus?
A) J.R. Hicks
B) Alfred Marshall
C) Vilfredo Pareto
D) Paul Samuelson
Answer: B
13.
In the Hicksian method, Consumer Surplus is measured through:
A) Marginal Utility
B) Compensating and Equivalent Variations
C) Money Income
D) Revealed Preferences
Answer: B
14.
According to Samuelson’s Revealed Preference Theory, the Law of Demand can be derived without:
A) Indifference curves
B) Utility measurement
C) Budget constraints
D) Price ratios
Answer: B
15.
The tangency point between the budget line and indifference curve represents:
A) Minimum satisfaction
B) Maximum satisfaction
C) Equal satisfaction
D) Minimum expenditure
Answer: B
16.
If income increases and the prices of both goods remain constant, the budget line:
A) Shifts outward parallelly
B) Shifts inward parallelly
C) Rotates clockwise
D) Becomes vertical
Answer: A
17.
When the consumer’s equilibrium shifts due to a fall in price of good X, it is an example of:
A) Income effect only
B) Substitution effect only
C) Both income and substitution effects
D) Price effect
Answer: D
18.
The slope of the indifference curve measures:
A) Marginal Utility
B) Marginal Rate of Substitution
C) Price Ratio
D) Total Utility
Answer: B
19.
The Law of Equi-Marginal Utility states that a consumer allocates his expenditure such that:
A)
B)
C)
D)
Answer: B
20.
Which of the following statements is true about a Giffen good?
A) Income effect is positive and greater than substitution effect
B) Substitution effect dominates income effect
C) Price effect is negative
D) Income effect and substitution effect are equal
Answer: A
21.
The Slutsky Equation decomposes the price effect into:
A) Income and substitution effects
B) Income and price effects
C) Price and demand effects
D) Substitution and cross-price effects
Answer: A
22.
A consumer’s equilibrium can also be expressed as:
A)
B)
C)
D) All of the above
Answer: D
23.
If two indifference curves intersect, it violates:
A) Non-satiation
B) Rationality
C) Consistency and transitivity
D) Convexity
Answer: C
24.
The Ordinal Utility Theory was introduced by:
A) Alfred Marshall
B) Vilfredo Pareto
C) Lionel Robbins
D) Adam Smith
Answer: B
25.
The Revealed Preference Theory improves on Indifference Curve Analysis by:
A) Using real-life behaviour instead of assumptions
B) Measuring utility in numbers
C) Ignoring rationality
D) Using only one good
Answer: A
26.
The indifference curve approach was popularized through the work of:
A) Hicks and Allen
B) Pareto and Marshall
C) Robbins and Pigou
D) Keynes and Fisher
Answer: A
27.
A horizontal budget line implies that:
A) The price of good Y is zero
B) The price of good X is zero
C) The consumer has zero income
D) The goods are perfect complements
Answer: B
28.
If both income and the price of X double while the price of Y remains constant, the budget line will:
A) Shift outward
B) Shift inward
C) Rotate about the Y-axis
D) Remain unchanged
Answer: C
29.
In consumer theory, the substitution effect isolates:
A) Change in quantity demanded due to change in real income
B) Change due to change in relative prices
C) Change in utility level
D) Total price effect
Answer: B
30.
Under the Revealed Preference Hypothesis, preferences are assumed to be:
A) Random and inconsistent
B) Transitive, consistent, and rational
C) Constant but non-transitive
D) Dependent on income only
Answer: B