Utility in economics refers to
A Satisfaction derived from consumption
B Usefulness measured in money
C Market value of a good
D Moral value of consumption
Utility means the power of a commodity to satisfy human wants, irrespective of moral or market value.
The cardinal approach to utility assumes that utility
A Cannot be measured
B Can be measured in numbers
C Is only ordinal
D Is always constant
Cardinal utility theory assumes utility can be measured numerically in hypothetical units like utils.
Which economist is associated with cardinal utility analysis?
A J.R. Hicks
B R.G.D. Allen
C Alfred Marshall
D Paul Samuelson
Alfred Marshall supported the cardinal measurement of utility in consumer analysis.
According to cardinal utility theory, utility is measured in
A Rupees
B Units
C Utils
D Calories
Utility is assumed to be measured in imaginary units called utils for analytical convenience.
Total utility refers to
A Utility of last unit consumed
B Sum of utilities from all units consumed
C Average utility
D Utility of first unit
Total utility is the aggregate satisfaction obtained from consuming all units of a commodity.
Marginal utility is
A Utility of all units
B Average satisfaction
C Additional utility from one more unit
D Utility foregone
Marginal utility is the change in total utility due to consumption of an additional unit.
When marginal utility becomes zero, total utility is
A Minimum
B Increasing
C Maximum
D Negative
Total utility is maximum when marginal utility falls to zero.
Law of diminishing marginal utility states that
A Total utility always decreases
B Marginal utility increases continuously
C Marginal utility diminishes with successive consumption
D Utility remains constant
As consumption of a commodity increases, the marginal utility derived from each additional unit diminishes.
The law of diminishing marginal utility assumes
A Continuous consumption
B Change in income
C Change in taste
D Change in price
The law assumes consumption of successive units without time gap and constant income, taste, and price.
Which of the following explains the downward slope of demand curve?
A Law of supply
B Law of diminishing marginal utility
C Law of returns
D Law of equi-marginal utility
As marginal utility diminishes, consumers are willing to pay less for additional units, causing downward slope of demand curve.
Marginal utility can be negative when
A Total utility is rising
B Total utility is maximum
C Total utility is falling
D Consumption is zero
When additional consumption reduces total satisfaction, marginal utility becomes negative.
The law of diminishing marginal utility does NOT apply when
A Units are homogeneous
B Consumption is continuous
C Goods are rare collectibles
D Taste remains constant
Rare collectibles may give increasing satisfaction, violating the law.
Equi-marginal utility principle states that consumer is in equilibrium when
A MU of all goods is maximum
B Total utility is minimum
C MU per rupee is equal for all goods
D Price equals marginal cost
Consumer equilibrium occurs when marginal utility per unit of money spent is equal across all goods.
Equi-marginal utility principle is also known as
A Law of demand
B Law of substitution
C Law of maximum satisfaction
D Law of diminishing returns
The principle ensures maximum satisfaction from given income, hence called law of maximum satisfaction.
Who propounded the law of equi-marginal utility?
A Alfred Marshall
B Gossen
C Hicks
D Samuelson
Hermann Heinrich Gossen introduced the law of equi-marginal utility.
Consumer equilibrium under cardinal utility requires
A MUx = MUy
B MUx / Px = MUy / Py
C Px = Py
D TU = MU
Equilibrium is achieved when marginal utility per rupee spent is equal for all goods.
Which of the following is an assumption of equi-marginal utility?
A Perfect competition
B Rational consumer
C Constant marginal cost
D Fixed technology
The principle assumes consumers are rational and aim to maximize satisfaction.
If MU of a good is zero, the consumer should
A Buy more
B Buy less
C Stop consumption
D Increase price
Zero marginal utility indicates no additional satisfaction, so consumption should stop.
Which utility approach rejects numerical measurement of utility?
A Cardinal approach
B Marshallian approach
C Ordinal approach
D Classical approach
Ordinal utility approach states that utility can only be ranked, not measured numerically.
Ordinal utility theory is associated with
A Alfred Marshall
B J.R. Hicks
C Adam Smith
D Ricardo
Hicks and Allen developed the ordinal utility and indifference curve analysis.
Indifference curve shows
A Same price combinations
B Same income combinations
C Same level of satisfaction
D Same production levels
Each indifference curve represents combinations of goods giving equal satisfaction to the consumer.
A higher indifference curve indicates
A Lower satisfaction
B Same satisfaction
C Higher satisfaction
D Zero utility
Higher indifference curves represent higher levels of satisfaction.
Indifference curves slope downward because
A Goods are substitutes
B Income remains constant
C Marginal rate of substitution is diminishing
D Utility is measurable
Diminishing marginal rate of substitution causes indifference curves to slope downward and be convex.
The convexity of indifference curve indicates
A Constant MRS
B Increasing MRS
C Diminishing MRS
D Zero MRS
Convexity reflects diminishing marginal rate of substitution between two goods.
Marginal rate of substitution (MRS) refers to
A Ratio of prices
B Ratio of utilities
C Rate of substitution of one good for another
D Rate of income change
MRS is the rate at which a consumer is willing to substitute one good for another without changing satisfaction.
Indifference curves never intersect because
A Prices change
B Income changes
C It leads to logical inconsistency
D Utility is cardinal
Intersection violates transitivity and consistency of consumer preferences.
Budget line shows
A Consumer preferences
B Consumer income constraint
C Producer equilibrium
D Utility measurement
Budget line represents combinations of goods a consumer can afford with given income and prices.
Consumer equilibrium under ordinal approach is achieved when
A Budget line touches indifference curve
B Budget line cuts indifference curve
C Indifference curve is vertical
D Income is zero
Equilibrium occurs at the tangency point of budget line and highest attainable indifference curve.
At consumer equilibrium under IC approach
A MRS > Price ratio
B MRS < Price ratio
C MRS = Price ratio
D MRS = Income
Equilibrium condition requires MRSxy = Px/Py.
Which is NOT an assumption of indifference curve analysis?
A Rational consumer
B Ordinal utility
C Constant marginal utility of money
D Diminishing MRS
Constant marginal utility of money is assumed in cardinal, not ordinal analysis.
Law of diminishing marginal utility explains
A Supply curve
B Demand curve
C Cost curve
D Revenue curve
Diminishing marginal utility explains why consumers demand less at higher prices.
When MU is negative, total utility
A Increases
B Remains constant
C Decreases
D Is maximum
Negative marginal utility reduces total utility.
Which of the following violates the law of diminishing marginal utility?
A Homogeneous units
B Rare stamp collection
C Continuous consumption
D Constant taste
Collectibles may give increasing satisfaction with additional units.
Equi-marginal principle applies to
A One commodity only
B Two commodities only
C Multiple commodities
D Free goods
The principle applies to allocation of income among all goods.
Consumer equilibrium ensures
A Minimum satisfaction
B Maximum satisfaction
C Zero utility
D Negative utility
Equilibrium implies optimal allocation of income for maximum satisfaction.
Indifference curve analysis is superior because it
A Uses utils
B Is more realistic
C Assumes constant MU of money
D Ignores preferences
Ordinal approach avoids unrealistic assumptions of cardinal measurement.
A straight-line indifference curve implies
A Perfect complements
B Perfect substitutes
C Inferior goods
D Giffen goods
Perfect substitutes have constant MRS, resulting in straight-line ICs.
L-shaped indifference curves represent
A Perfect substitutes
B Luxury goods
C Perfect complements
D Inferior goods
Perfect complements are consumed in fixed proportions, forming L-shaped curves.
Budget line shifts parallelly when
A Prices change
B Income changes
C Preferences change
D Utility changes
Change in income causes parallel shift of budget line.
Budget line rotates when
A Income changes
B Utility changes
C Price of one good changes
D Taste changes
Change in price of one good rotates the budget line.
Consumer equilibrium under IC analysis ensures
A MUx = MUy
B TU is maximum
C MRS = Price ratio
D Income is constant
Tangency condition ensures equilibrium.
Which theory assumes utility is subjective and non-measurable?
A Cardinal utility
B Ordinal utility
C Classical theory
D Marshallian theory
Ordinal utility theory ranks preferences without measuring utility numerically.
The slope of indifference curve represents
A Price ratio
B Income ratio
C Marginal rate of substitution
D Marginal utility
Slope of IC equals MRS between two goods.
Which concept replaces marginal utility in ordinal analysis?
A Total utility
B Marginal cost
C Marginal rate of substitution
D Average utility
Ordinal analysis uses MRS instead of marginal utility.
Indifference curves are
A Upward sloping
B Horizontal
C Vertical
D Downward sloping
To maintain same satisfaction, more of one good compensates less of another.
Utility maximization under IC approach requires
A Lowest IC
B Highest IC affordable
C Any IC
D Zero IC
Consumer chooses the highest attainable indifference curve.
Law of diminishing marginal utility applies to
A Money only
B All goods
C Most goods
D Luxury goods only
The law generally applies to most goods, with some exceptions.
Equi-marginal utility principle assumes
A Ordinal preferences
B Constant MU of money
C Income inequality
D Market imperfections
Constant marginal utility of money is a key assumption in cardinal analysis.
Indifference curve analysis does NOT explain
A Consumer equilibrium
B Demand curve derivation
C Price determination
D Consumer choice
Price determination belongs to market analysis, not consumer theory.
Consumer behaviour theory primarily studies
A Producer decisions
B Government policy
C Consumer choice under constraints
D National income
Consumer choice under constraints