1.
The Indifference Curve technique assumes:
A) Utility is measurable in cardinal numbers.
B) Consumer behaviour is inconsistent.
C) Utility is comparable only in order of preference.
D) Marginal utility of money is diminishing.
Answer: C
2.
According to the Ordinal Utility approach, consumer equilibrium is obtained when:
A) The consumer attains maximum utility subject to income constraint.
B) Marginal utilities of goods are equal.
C) Price of one good equals its marginal utility.
D) Income equals total expenditure.
Answer: A
3.
Which of the following is not an assumption of the Indifference Curve analysis?
A) Rationality of the consumer
B) Constant income
C) Interdependence of utilities
D) Transitivity of preferences
Answer: C
4.
The Law of Equi-Marginal Utility can be expressed as:
A)
B)
C)
D)
Answer: B
5.
The slope of the Indifference Curve equals:
A) Marginal Rate of Substitution
B) Ratio of total utilities
C) Price ratio of goods
D) Marginal utilities of income
Answer: A
6.
If the price of good X falls and all else remains constant, the new equilibrium point will:
A) Move upward along the indifference map
B) Move downward along the same curve
C) Shift to a higher indifference curve
D) Remain unchanged
Answer: C
7.
Under Revealed Preference theory, a consumer reveals preference for bundle A over B when:
A) Bundle A is cheaper than B.
B) Both bundles yield equal utility.
C) A is chosen even when B was affordable.
D) Prices of goods remain constant.
Answer: C
8.
The Diminishing Marginal Rate of Substitution implies that:
A) Indifference curves are convex to the origin.
B) Indifference curves are straight lines.
C) Consumer preferences are inconsistent.
D) Goods are perfect complements.
Answer: A
9.
Which of the following combinations depicts consumer equilibrium under the Ordinal Utility approach?
A)
B)
C)
D)
Answer: B
10.
The substitution effect shows:
A) Change in consumption due to change in real income.
B) Change due to change in relative prices of goods.
C) Change in total utility.
D) Shift in budget line parallelly outward.
Answer: B
11.
When two goods are perfect substitutes, the indifference curves will be:
A) Concave to the origin.
B) Convex to the origin.
C) L-shaped.
D) Straight lines.
Answer: D
12.
In Marshall’s concept of Consumer Surplus, utility is:
A) Ordinal
B) Cardinal and measurable in money terms
C) Relative
D) Socially determined
Answer: B
13.
Hicksian measurement of consumer surplus is based on:
A) Compensating and Equivalent Variations.
B) Law of Diminishing Marginal Utility.
C) Demand function only.
D) Revealed preferences.
Answer: A
14.
In the Indifference Curve analysis, the consumer’s budget line shifts parallelly outward when:
A) Prices fall in the same proportion.
B) Income increases.
C) Prices rise in the same proportion.
D) Income decreases.
Answer: B
15.
The Revealed Preference approach assumes that consumer behaviour is:
A) Irrational but measurable.
B) Consistent and transitive.
C) Random and unpredictable.
D) Dependent only on income.
Answer: B
16.
The equilibrium between marginal utilities and prices in the Cardinal approach indicates:
A) Maximization of satisfaction.
B) Minimization of expenditure.
C) Constant total utility.
D) Equality of total utilities.
Answer: A
17.
Which one of the following correctly expresses consumer equilibrium in the Cardinal Utility approach?
A)
B)
C)
D)
Answer: B
18.
The Slutsky Equation divides the price effect into:
A) Income effect + Substitution effect
B) Price effect + Utility effect
C) Income effect + Wealth effect
D) Price effect + Demand effect
Answer: A
19.
If two indifference curves intersect, the assumption violated is:
A) Rationality
B) Transitivity of preferences
C) Diminishing MRS
D) Completeness of choice
Answer: B
20.
The Law of Demand under Revealed Preference Theory can be derived because:
A) Utility is measurable.
B) Consumers behave inconsistently.
C) Price-quantity relationship is observable.
D) Consumers’ income remains fixed.
Answer: C
21.
Under Cardinal Utility theory, the marginal utility of money is assumed to be:
A) Constant
B) Increasing
C) Decreasing
D) Negative
Answer: A
22.
A rightward rotation of the budget line around the Y-axis indicates:
A) Fall in price of good X.
B) Increase in price of good Y.
C) Rise in consumer income.
D) Fall in income.
Answer: A
23.
In case of Giffen goods:
A) Both income and substitution effects reinforce each other.
B) Negative income effect outweighs substitution effect.
C) Substitution effect dominates income effect.
D) Price effect is positive.
Answer: B
24.
Consumer equilibrium changes to a higher indifference curve when:
A) Income decreases.
B) Price of one good rises.
C) Income increases or price falls.
D) Budget line becomes steeper.
Answer: C
25.
The Indifference Map represents:
A) All combinations giving different levels of satisfaction.
B) Combinations yielding the same utility.
C) Price combinations of goods.
D) Income levels at equilibrium.
Answer: A
26.
An upward-sloping indifference curve would indicate:
A) Normal goods.
B) Inferior goods.
C) Giffen goods.
D) Both goods are ‘bads’.
Answer: D
27.
In consumer theory, the substitution effect is always:
A) Negative
B) Positive
C) Neutral
D) Equal to price effect
Answer: B
28.
If the income effect is zero, the good must be:
A) Normal
B) Inferior
C) Neutral
D) Giffen
Answer: C
29.
The convexity of indifference curves reflects:
A) Diminishing MRS
B) Increasing MRS
C) Constant MRS
D) Increasing marginal utility
Answer: A
30.
According to Hicks, the main advantage of the Ordinal approach over the Cardinal one is:
A) It does not require utility measurement.
B) It eliminates the need for demand theory.
C) It measures satisfaction in monetary terms.
D) It assumes increasing marginal utility.
Answer: A