Microeconomics Practice Test - 4: Consumer Demand Theory
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- When total utility increases, marginal utility is
- negative and increasing
- negative and declining
- zero
- positive and declining
- If the MU of the last unit of X consumed is twice the MU of the last unit of Y consumed, the consumer is in equilibrium only if
- the price of X is twice the price of Y
- the price of X is equal to the price of Y
- the price of X is one half of the price of Y
- any of the above is possible
- The statement C = D = 10 utils implies
- an ordinal measure of utility only
- a cardinal measure of utility only
- an ordinal and a cardinal measure of utility
- none of the above
- If an indifference curve were horizontal (assume X is measured along the horizontal axis and Y along the vertical axis), this would mean that the consumer is saturated with
- commodity X only
- commodity Y only
- both commodity X and commodity Y
- neither commodity X nor commodity Y
- A consumer who is below the personal budget line (rather than on it)
- is not spending all personal income
- is spending all personal income
- may or may not be spending all personal income
- is in equilibrium
- At equilibrium, the slope of the indifference curve is
- equal to the slope of the budget line
- greater than the slope of the budget line
- smaller than the slope of the budget line
- either equal, larger, or smaller than the slope of the budget line
- If the MRSxy for individual A exceeds the MRSxy for individual B, it is possible for individual A to gain by giving up
- X in exchange for more Y from B
- Y in exchange for more X from B
- either X or Y
- we cannot say without additional information
- The Engel curve for a Giffen good is
- negatively sloped
- positively sloped
- vertical
- horizontal
- If the price-consumption curve for a commodity is horizontal at all relevant prices for it, the demand curve for this commodity is
- horizontal
- positively sloped
- vertical
- a rectangular hyperbola
- The price-consumption curve for a straight-line demand curve extended to both axes
- falls throughout
- rises throughout
- falls and then rises
- rises and then falls
- The substitution effect for a fall in the price of a commodity (ceteris paribus) is given by
- a movement up a given indifference curve
- a movement from a higher to a lower indifference curve
- a movement down a given indifference curve
- any of the above
- When real income rather than money income is kept constant in drawing a consumer’s demand curve for a commodity, the demand curve is negatively sloped
- Always
- never
- sometimes
- often
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