Consumers Equilibrium and Demand Test

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Consumers Equilibrium and Demand Test - 7

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Weekly Quiz Competition

Question 1
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Which of the following law states that the more a consumer consumes of a product the less is the utility he derives from the additional consumption?

A
Law of cardinal utilit

B
Law of diminishing marginal utility

C
Law of ordinal utility

D
Law of equi-marginal utility

Solution

Other things remaining the same when a person takes successive units of a commodity, the marginal utility diminishes constantly
Question 2
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___________ is the rate at which a consumer is willing to substitute one good for the other maintaining the same level of utility?

A
Income effect

B
Substitution effect

C
Marginal rate of substitution

D
Increasing marginal utility

Solution

the marginal rate of substitution (MRS) is the rate at which a consumer can give up some amount of one good in exchange for another good while maintaining the same level of utility. At equilibrium consumption levels (assuming no externalities), marginal rates of substitution are identical.
Question 3
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How would you calculate the new partner’s capital, when it is not given in the question?

A
Old partners capital after adjustment x reciprocal of old partner’s share × sacrificing share

B
Old partners capital after adjustment x reciprocal of sacrificing share × new partner’s share

C
Price of the two goods

D
Old partners capital after adjustment x reciprocal of remaining share x new partner’s share

Solution

Calculation of new partner’s capital should be done as follows:
1.Calculated the combined or adjusted capitals of all the existing partners (after all adjustments)
2.Find out the reciprocal of remaining share
3.Now, combined capitals x reciprocal of remaining share x new partner’s share
Question 4
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The total utility divided by the number of units consumed is known as?

A
Total utility

B
Marginal utility

C
Average utility

D
None of above

Solution

Average utility is nothing but utility derived by per unit of consumption.
Question 5
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According to Marshall, the law of diminishing marginal utility applies on ___________?

A
Bank money

B
Money in the same manner as it applies on the commodity

C
Cash but not on bank money

D
All commodities except money

Solution

As per Alferd marshall MU of money is constant.
Question 6
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The coefficient of price elasticity of demand is always

A
Zero

B
Positive

C
Negative

D
Undefined

Solution

There is a negative relation between price of the commodity and its quantity demanded,due to which elasticity coffecient is always negative.
Question 7
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When the total utility is increasing at an increasing rate, marginal utility is___________?

A
Decreasing

B
Constant

C
Negative

D
Increasing

Solution

MU is addition to TU,

so if MU is rising TU will rise with higher rate.

MU never rises as per LDMU.*****
Question 8
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At the point of tangency the slope of the indifference curve is ___________?

A
Greater than the price line

B
Less than the price line

C
The same as the price line

D
None of these

Solution

At point of tagency MRE=MRS.
Question 9
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A movement along a given indifference curve is known as?

A
Price effect

B
Substitution effect

C
Income effect

D
None of above

Solution

Consumer substitutes one good for other along IC in order to keep satisfaction level constant.
Question 10
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Consumer surplus is more in the case of ________ ?

A
Comforts

B
Necessities

C
Inferior goods

D
Luxuries

Solution

Consumer surplus is a measure of the welfare that people gain from consuming goods and servicesConsumer surplus is defined as the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actually do pay .

As per Alferd marshall ,CS can not be calculated for luxary goods, inferior goods and necessities.

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Re-Attempt Weekly Quiz Competition

Consumers Equilibrium and Demand Test - 7

Result

Consumers Equilibrium and Demand Test - 7

Score

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Rank

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SHARING IS CARING

Question 1

Law of cardinal utilit

Law of diminishing marginal utility

Law of ordinal utility

Law of equi-marginal utility

Solution

Question 2

Income effect

Substitution effect

Marginal rate of substitution

Increasing marginal utility

Solution

Question 3

Old partners capital after adjustment x reciprocal of old partner’s share × sacrificing share

Old partners capital after adjustment x reciprocal of sacrificing share × new partner’s share

Price of the two goods

Old partners capital after adjustment x reciprocal of remaining share x new partner’s share

Solution

Question 4

Total utility

Marginal utility

Average utility

None of above

Solution

Question 5

Bank money

Money in the same manner as it applies on the commodity

Cash but not on bank money

All commodities except money

Solution

Question 6

Zero

Positive

Negative

Undefined

Solution

Question 7

Decreasing

Constant

Negative

Increasing

Solution

Question 8

Greater than the price line

Less than the price line

The same as the price line

None of these

Solution

Question 9

Price effect

Substitution effect

Income effect

None of above

Solution

Question 10

Comforts

Necessities

Inferior goods

Luxuries

Solution

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