Question 1

According to Hicks substitution effect is

Accepted Answer

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 consumptionE) B) and C)
F) A) and D)

Question 2

For a giffen good, when price falls

Accepted Answer

A)  demand increases at a faster rate
B)  demand decreases
C)  demand remains constant
D)  demand curve has a negative slopeE) B) and C)
F) B) and D)

Question 3

Strong ordering means

Accepted Answer

A)  absence of indifference
B)  presence of indifference
C)  no difference between different combinations
D)  none of the aboveE) A) and B)
F) A) and C)

Question 4

If negative income effect is greater than positive substitution effect : the product will be

Accepted Answer

A)  a normal good
B)  an inferior good
C)  a giffen good
D)  a complementary goodE) A) and B)
F) All of the above C

Question 5

The slope of a budget line is

Accepted Answer

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 countryE) A) and B)
F) None of the above

Question 6

If negative income effect is greater than positive substitution effect : price effect will be

Accepted Answer

A)  zero
B)  negative
C)  positive
D)  positive and greater than oneE) C) and D)
F) All of the above

Question 7

The income effect for a commodity is

Accepted Answer

A)  is always positive
B)  is always negative
C)  depends upon price effect
D)  determines the nature of the commodityE) B) and C)
F) A) and B)

Question 8

Which of the following statement is FALSE with regard to marginal utility

Accepted Answer

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 rangeE) None of the above
F) All of the above

Question 9

Which of the following is called gossans first law

Accepted Answer

A)  law of substitution
B)  law of equi marginal utility
C)  law of diminishing marginal utility
D)  none of the aboveE) B) and C)
F) None of the above

Question 10

Which of the following statement is TRUE with regard to total utility

Accepted Answer

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 negativeE) B) and C)
F) A) and D)

Question 11

If negative income effect is less than positive substitution effect : the product will be

Accepted Answer

A)  a normal good
B)  an inferior good
C)  a giffen good
D)  a complementary goodE) C) and D)
F) None of the above

Question 12

According to Marshall consumer surplus is:

Accepted Answer

A)  total utility - marginal utility
B)  total utility + marginal utility
C)  total utility derived - price
D)  price - marginal utilityE) A) and B)
F) B) and C) C

Question 13

Which of the following statements is true

Accepted Answer

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 effectE) B) and C)
F) A) and D)

Question 14

Indifference curves are

Accepted Answer

A)  always parallel
B)  may be parallel
C)  may not be parallel
D)  both b and cE) C) and D)
F) A) and D)

Question 15

When individuals income falls (everything remain the same)  his demand for an inferior good

Accepted Answer

A)  rises
B)  falls
C)  remains the same
D)  we cannot say without additional informationE) All of the above
F) C) and D)

Question 16

Inferior goods are the goods with

Accepted Answer

A)  falling income effect
B)  rising income effect
C)  negative income effect
D)  positive marshallian effectsE) None of the above
F) B) and C)

Question 17

The slope of a budget line throughout its length is

Accepted Answer

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 countryE) None of the above
F) C) and D)

Question 18

In the fundamental theorem of consumption and to prove the law of demand, Samualson uses

Accepted Answer

A)  compensating variation in income
B)  the cost difference
C)  the over compensation effect
D)  substituting variation in priceE) All of the above
F) B) and D)

Question 19

As per indifference curve analysis consumer equilibrium is attained when

Accepted Answer

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.E) A) and B)
F) A) and D) B

Question 20

Price effect is

Accepted Answer

A)  income effect - substitution effect
B)  substitution effect - income effect
C)  income effect + substitution effect
D)  income effect + substitution effect- negative effectsE) C) and D)
F) All of the above

Exam 1: Consumer Theory and Utility

According to Hicks substitution effect is

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For a giffen good, when price falls

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Strong ordering means

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If negative income effect is greater than positive substitution effect : the product will be

Correct AnswerverifiedC

The slope of a budget line is

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If negative income effect is greater than positive substitution effect : price effect will be

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The income effect for a commodity is

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Which of the following statement is FALSE with regard to marginal utility

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Which of the following is called gossans first law

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Which of the following statement is TRUE with regard to total utility

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If negative income effect is less than positive substitution effect : the product will be

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According to Marshall consumer surplus is:

Correct AnswerverifiedC

Which of the following statements is true

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Indifference curves are

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When individuals income falls (everything remain the same) his demand for an inferior good

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Inferior goods are the goods with

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The slope of a budget line throughout its length is

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In the fundamental theorem of consumption and to prove the law of demand, Samualson uses

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As per indifference curve analysis consumer equilibrium is attained when

Correct AnswerverifiedB

Price effect is

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C

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C

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B

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