Deck 15: Demand Analysis and Utility Theory

Question 1

If the long run average cost curve for a typical firm in an industry is downward sloping to the right it becomes difficult to sustain the assumption of

A)Diminishing returns
B)Perfect competition
C)Ceteris paribus
D)Rising marginal costs in the short run

Answer 1

Perfect competition

Question 2

Marginal costs and average variable costs are equal when

A)Average variable cost is a maximum
B)Average variable cost is rising
C)Average variable cost is falling
D)Average variable cost is a minimum

Answer 2

Average variable cost is a minimum

Question 3

Theory of demand examines the behaviour of the--------

A)Consumer
B)Producer
C)Firm
D)Industry

Answer 3

Consumer

Question 4

Change in utility resulting from one unit change in consumption is called:

A)Total Utility
B)Extra Utility
C)Marginal Utility
D)Average Utility

Question 5

Saturation point is the point where:

A)TU = 0
B)MU = 0
C)MU is +ve
D)TU = 1

Question 6

Measurable utility is the postulate of:

A)Neo-Classical school
B)Ordinalist school
C)Behaviourist school
D)Keneysians

Question 7

Which of the following is Gossen's first law:

A)Law of Diminishing Marginal Utility
B)Law of Equi Marginal Utility
C)Law of substitution
D)Law of Diminishing Returns

Question 8

In the case of a free good, the consumer will be in equilibrium when:

A)MU = P
B)MU = 0
C)TU = 0
D)TU =1

Question 9

Change in demand due to a change in the price of related good :

A)Cross demand
B)Price demand
C)Income demand
D)None of these

Question 10

The Price and quantity relationship for an inferior good is:

A)Direct
B)Inverse
C)Positive
D)Indirect

Question 11

In the case of normal goods, the quantity demanded varies inversely with:

A)Price of good
B)Income of the consumer
C)Fashion of the good
D)Savings

Question 12

Which of the following is a cardinalist approach to demand analysis:

A)Marshallian utility analysis
B)Indifference Curve Analysis
C)Revealed Preference Theory
D)None of these

Question 13

The convexity of an indifference curve shows:

A)Diminishing MRS
B)Increasing MRS
C)Constant MRS
D)None

Question 14

A movement from one point to another along an indifference curve makes the satisfaction:

A)Increasing
B)Decreasing
C)Unaltered
D)None

Question 15

In the case of an indifference curve

A)dU/dX>dU/dY
B)dU/dX = dU/dY
C)dU/dXD)dU/dX?dU/Dy

Question 16

An Indifference Curve to the right of another represents combinations which are:

A)Indifferent
B)Preferable
C)Inferior
D)Superior

Question 17

As moving from left to right through an indifference curve, the MRS of X for Y

A)Increases
B)Remains the same
C)Decreases
D)Both A and C

Question 18

The slope of an indifference curve represents:

A)Price ratio of good X and Y
B)MRTS L,K
C)MRSx,y
D)MRS

Question 19

In the case of perfect complementaries, the MRS between goods is:

A)Zero
B)Positive
C)Negative
D)None

Question 20

In a combination of X and Y, if price of Y alone changes, the X intercept will :

A)Rotate upwards
B)Rotate downwards
C)Not be changed
D)Parallel

Question 21

At the point of tangency of an indifference curve with a budget line:

A)MRSxy =Px/Py
B)MRSxy>Px/PY
C)MRSxyD)MRSxy?Px/PY