Test: Theory Of Consumer Behaviour - 4


25 Questions MCQ Test Economics Class 12 | Test: Theory Of Consumer Behaviour - 4


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QUESTION: 1

At what point does total utility starts diminishing?

Solution:

MU is addition to TU when an MU becomes -ive TU falls.

QUESTION: 2

Total utility curve:

Solution:

First rises till MU is positive, then reaches its maximum when MU=0,then starts falling when MU becomes negitive.

QUESTION: 3

Total utility is maximum when?

Solution:

TU,   First rises till MU is positive, then reaches its maximum when MU=0,then starts falling when MU becomes negitive.

QUESTION: 4

the slope of priceline throughout its length?

Solution:

slope of price line is given by ratio of the prices of two goods, i.e. Px/Py, which is constant.

QUESTION: 5

Which of the following is not true?

Solution:

Which of the following is not true?


Indifference curves cannot intersect each other

Two indifference curve can be tangent to each other

Indifference curves are convex to the origin

Indifference curves slopes downward to the right

Explanation:

The indifference curves cannot intersect each other. It is because at the point of tangency, the higher curve will give as much as of the two commodities as is given by the lower indifference curve. This is absurd and impossible.

QUESTION: 6

Which of the following assumption is not necessary for the cardinal utility theory?

Solution:

Approch is for an individual consumer, market has nothing to do with it.

QUESTION: 7

The doctrine of consumer’s surplus is based on?

Solution:

The theory of consumer's surplus is based on the law of diminishing marginal utility. The law of diminishing marginal utility claims that as you consumer more of a commodity, the marginal utility derived from it decreases eventually.a

QUESTION: 8

When the total utility is increasing at an increasing rate, marginal utility is __________?

Solution:

The correct option is D.

Total utility refers to the total satisfaction obtained from the consumption of all  possible units of a commodity. Marginal utility is the additional utility derived from the consumption of one more unit of the given commodity. MU=TUn-TUn-1.So when TU is increasing at an increases this means utility derived from each unit is increasing. This means marginal utility is increasing. 

QUESTION: 9

At the saturation point of commodity X, the MUx is?

Solution:

Saturation Point: The point where the desire to consume the same product anymore becomes zero.

hence additional consumption will not give any satisfaction to consumer,MU = 0

QUESTION: 10

A curve which first moves upwards then downwards is__________?

Solution:

 

MU is the rate of change of TU.

When the MU decreases, TU increases at decreasing rate.

When MU becomes zero, TU is maximum. It is a saturation point.

When MU becomes negative, TU declines

QUESTION: 11

Which of the following is one of the assumptions of the indifference curve analysis?

Solution:

The ordinal utility theory or the indifference curve analysis is based on four main assumptions.

Rational behavior of the consumer.

Utility is ordinal.

Diminishing marginal rate of substitution.

Consistency in choice. 

QUESTION: 12

At the point of tangency the slope of the indifference curve is ___________?

Solution:

At point of tagency MRE=MRS.

QUESTION: 13

A movement along a given indifference curve is known as?

Solution:

Consumer substitutes one good for other along IC in order to keep satisfaction level constant.

QUESTION: 14

Marginal utility curve of a given consumer is also his?

Solution:

The law of diminishing marginal utility states that marginal utility declines as consumption increases. Because demand price depends on the marginal utilityobtained from a good, price also declines as consumption increases, meaning price and quantity demanded are inversely related, which is the law of demand.

QUESTION: 15

Indifference curve depicts

Solution:

An indifference curve is a graph showing combination of two goods that give the consumer equal satisfaction and utility. Each point on an indifference curveindicates that a consumer is indifferent between the two and all points give him the same utility.

QUESTION: 16

If two negatively sloped demand curves intersect then

Solution:

flatter the curve more the elasticity,steeper the curve less the elasticity.

QUESTION: 17

If two negatively sloped demand curves intersect then elasticity of demand at the point of intersection will be

Solution:

No. elasticity of demand will me more on a flatter curve than on the steeper curve because since price elasticity of demand = %change in /% change in price and hence in the flatter demand curve the change in price will be lesser which will mean that the change in Quantity will be divided by a smaller number.

QUESTION: 18

Which of the following will have inelastic demand?

Solution:

Demand for medicine is in-elastic as it falls in category of a necessity good.

QUESTION: 19

The value of elasticity in case of a horizontal line will be

Solution:

price elasticity of demand = % change in quantity demanded / % change in price,

which tends to infinity in case of horizontal demand curve

QUESTION: 20

Which of the following will have elastic demand?

Solution:

It is only option of non-necessity/mandatory good among given options.

QUESTION: 21

What is the relationship between slope and the demand curve?

Solution:

The slope of a demand curve is ∆P/∆Q. If the price falls, we write -∆P/∆Q or if price rises demand falls, we write ∆P/∆Q.

QUESTION: 22

A rise in the income of the consumer leads to a fall in the demand for commodity ‘x’. What type of good is commodity ‘x’?

Solution:

An inferior good is a type of good for which demand declines as the level of income increases.

QUESTION: 23

The substitute goods of a normal good are those that can be used

Solution:

Substitute goods are those goods that can satisfy the same necessity, they can be used for the same end.

QUESTION: 24

One factor that causes a leftward shift of the demand curve out of the following is

Solution:

Fall in income cause leftward shift in demand curve because when person's income decreases he will stop buying unnecessary goods.it will result in fall in demand curve. when demand decrease demand curve shifts leftward.

QUESTION: 25

One factor that causes a movement along the demand curve of a commodity

Solution:

Movements along a demand curve happen only when the price of the good changes.

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