What does the concept of utility refer to in economics?
A) The amount of satisfaction a consumer derives from consuming a good or service
B) The amount of money a consumer spends on goods and services
C) The production cost of a good
D) The quantity of goods produced in an economy
Which of the following is true about total utility?
A) It decreases as more units of a good are consumed
B) It remains constant regardless of consumption
C) It increases with more consumption up to a certain point
D) It only depends on income levels
What does marginal utility represent?
A) The total satisfaction derived from all units consumed
B) The change in total utility from consuming one more unit of a good
C) The price of a good in the market
D) The total money spent on a good
Which of the following is the law of diminishing marginal utility?
A) As more units of a good are consumed, the total utility decreases
B) As more units of a good are consumed, the marginal utility increases
C) As more units of a good are consumed, the marginal utility decreases
D) Marginal utility remains constant regardless of consumption
If the marginal utility of a good is negative, it means:
A) The total utility is increasing
B) The consumer is over-consuming the good
C) The good is a Giffen good
D) The consumer is maximizing utility
What does the principle of consumer equilibrium state?
A) A consumer will purchase equal quantities of all goods
B) A consumer will maximize utility by allocating spending such that the marginal utility per dollar spent is equal across all goods
C) A consumer will buy more goods as income increases
D) A consumer’s total utility is maximized when marginal utility is zero
What is the difference between total utility and marginal utility?
A) Total utility is the overall satisfaction from all goods, while marginal utility is the additional satisfaction from one more unit
B) Total utility measures the total cost of goods, while marginal utility measures the price
C) Total utility is constant, while marginal utility changes with consumption
D) Total utility measures the consumption of goods, while marginal utility measures the income
Which of the following describes the utility-maximizing rule for consumers?
A) Consumers maximize utility by consuming only the good that offers the highest marginal utility
B) Consumers maximize utility by choosing the combination of goods where marginal utility per dollar is equal for all goods
C) Consumers maximize utility by consuming all goods in equal quantities
D) Consumers maximize utility by spending all their income on the cheapest good
What happens to marginal utility as a consumer consumes more units of a good?
A) It remains constant
B) It increases at a decreasing rate
C) It decreases at a decreasing rate
D) It decreases at an increasing rate
In utility theory, a Giffen good is characterized by:
A) An increase in demand as the price increases
B) A decrease in demand as income increases
C) A positive relationship between price and quantity demanded
D) A good that violates the law of diminishing marginal utility
What does the budget constraint represent in consumer theory?
A) The total utility derived from all goods consumed
B) The amount of money a consumer has available to spend on goods
C) The combination of goods a consumer is indifferent to
D) The set of goods that maximize the consumer’s utility
Which of the following is an assumption of utility theory?
A) Consumers are rational and aim to maximize satisfaction
B) Consumers prefer to spend all their income on one good
C) All goods are perfect substitutes for each other
D) Consumers are limited to only two goods in their consumption choices
In the context of consumer behavior, what does “utility” refer to?
A) The total expenditure on goods
B) The subjective satisfaction or pleasure a consumer gets from consuming a good
C) The supply of goods in the market
D) The cost of producing a good
What is the shape of an indifference curve in consumer theory?
A) Downward sloping and convex to the origin
B) Upward sloping and concave to the origin
C) Vertical and straight
D) Horizontal and straight
If the price of a good increases, how does the budget line change?
A) It rotates outward
B) It rotates inward
C) It shifts parallel to the original budget line
D) It remains unchanged
In utility theory, what is the primary goal of a consumer?
A) To consume all goods at equal levels
B) To maximize total utility subject to their budget constraint
C) To spend all their income on the cheapest good
D) To consume as much as possible without regard to utility
A consumer’s demand curve is derived from:
A) Their budget constraint
B) Their preferences and the utility-maximizing rule
C) The price of a good alone
D) The cost of producing a good
Which of the following is an example of diminishing marginal utility?
A) The satisfaction from eating one slice of pizza decreases as more slices are consumed
B) The satisfaction from eating one slice of pizza increases as more slices are consumed
C) The satisfaction from eating pizza is constant no matter how many slices are consumed
D) The satisfaction from eating pizza never decreases
Which of the following is true about the utility function?
A) It represents the relationship between income and the quantity of goods consumed
B) It shows the total utility derived from various combinations of goods
C) It determines the price at which goods are sold
D) It represents the supply curve in a competitive market
If the marginal utility of two goods is equal per dollar spent, then:
A) The consumer is at a point of maximum satisfaction
B) The consumer should buy more of the good with the higher marginal utility
C) The consumer should adjust their budget to buy more of the good with the lower utility
D) The consumer is experiencing diminishing returns
What is the implication of a perfectly inelastic demand curve for a good?
A) Consumers are highly responsive to price changes
B) Consumers will purchase the same amount regardless of price changes
C) The price will fluctuate based on supply and demand
D) The good is a normal good
The concept of utility maximization involves:
A) Equal consumption of all goods
B) Allocating resources such that the marginal utility per dollar spent is the same for all goods
C) Spending all income on the good with the highest utility
D) Consuming all goods in the market equally
The income effect of a price change occurs when:
A) The consumer adjusts their consumption based on the change in income caused by a price change
B) The consumer buys more of a good due to a price increase
C) The consumer buys less of a good due to a price increase
D) The consumer substitutes one good for another due to a price change
Which of the following is true for the substitution effect?
A) The substitution effect leads to an increase in demand for goods whose prices have risen
B) The substitution effect causes consumers to buy less of a good when its price increases
C) The substitution effect leads to a decrease in demand for all goods
D) The substitution effect does not impact the demand for goods
