### Microeconomics Practice Test - 4: Consumer Demand Theory

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1. When total utility increases, marginal utility is

1. negative and increasing

2. negative and declining

3. zero

4. positive and declining

2. 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

1. the price of X is twice the price of Y

2. the price of X is equal to the price of Y

3. the price of X is one half of the price of Y

4. any of the above is possible

3. The statement C = D = 10 utils implies

1. an ordinal measure of utility only

2. a cardinal measure of utility only

3. an ordinal and a cardinal measure of utility

4. none of the above

4. 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

1. commodity X only

2. commodity Y only

3. both commodity X and commodity Y

4. neither commodity X nor commodity Y

5. A consumer who is below the personal budget line (rather than on it)

1. is not spending all personal income

2. is spending all personal income

3. may or may not be spending all personal income

4. is in equilibrium

6. At equilibrium, the slope of the indifference curve is

1. equal to the slope of the budget line

2. greater than the slope of the budget line

3. smaller than the slope of the budget line

4. either equal, larger, or smaller than the slope of the budget line

7. If the MRSxy for individual A exceeds the MRSxy for individual B, it is possible for individual A to gain by giving up

1. X in exchange for more Y from B

2. Y in exchange for more X from B

3. either X or Y

4. we cannot say without additional information

8. The Engel curve for a Giffen good is

1. negatively sloped

2. positively sloped

3. vertical

4. horizontal

9. If the price-consumption curve for a commodity is horizontal at all relevant prices for it, the demand curve for this commodity is

1. horizontal

2. positively sloped

3. vertical

4. a rectangular hyperbola

10. The price-consumption curve for a straight-line demand curve extended to both axes

1. falls throughout

2. rises throughout

3. falls and then rises

4. rises and then falls

11. The substitution effect for a fall in the price of a commodity (ceteris paribus) is given by

1. a movement up a given indifference curve

2. a movement from a higher to a lower indifference curve

3. a movement down a given indifference curve

4. any of the above

12. 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

1. Always

2. never

3. sometimes

4. often