RKCE

9 Hari Das Daw Road New Alipore

CONSUMER EQUILIBRIUM
Class 11 - Economics

1. Total utility is maximum when? [1]

a) Average utility is maximum b) Marginal utility is zero.

c) Average utility is equal to zero d) Marginal utility is maximum

2. _____________ is defined as the difference between what the consumer is willing to pay for a product and what [1]
he is able to pay?

a) Optimum price b) Price gap

c) Consumer surplus d) Consumer burden

3. Indifference curve slopes___________? [1]

a) Downward to the left b) Upward to the right

c) Upward to the left d) Downward to the right

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4. Which of the following statements regarding ordinal utility is true? [1]
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a) Utility cannot be measured, but can be b) Utility can be measured, but cannot be
ranked in order of preferences. ranked in order of preferences.

c) Utility can neither be measured nor can be d) Utility can be measured and can also be
ranked in order of preferences. ranked in order of preferences.
5. A movement along a given indifference curve is known as? [1]

a) None of above b) Income effect

c) Substitution effect d) Price effect

6. Which of the following utility approach is based on the theory of Alfred Marshall? [1]

a) None of these b) Cardinal utility approach

c) Independent variable approach d) Ordinal utility approach

7. In an indifference map, higher IC indicates: [1]

a) either same or higher level of satisfaction b) lower level of satisfaction

c) same level of satisfaction d) higher level of satisfaction

8. With the increase in consumption by one unit of the commodity, TU increases from 150 to 180, then marginal [1]
utility is:

a) 50 b) 30

c) 0.833 d) 1.2
9. At the saturation point of commodity X, the MUx is? [1]

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 a) Positive b) None of these

c) Zero d) Negative
10. What does monotonicity of preferences imply? [1]

a) Consumer always prefer bundle giving b) Consumer always prefer bundle giving
minimum satisfaction maximum satisfaction

c) Consumer will not prefer bundle giving d) Consumer always prefer bundle giving same
maximum satisfaction satisfaction
11. Marginal rate of substitution indicates: [1]

a) slope of budget line b) slope of indifference curve

c) slope of income line d) slope of production possibility curve

PX
12. In a situation when MRS XY > , the consumer would react by: [1]
PY

a) increasing the consumption of commodity- b) none of these

X

c) increasing the consumption of commodity- d) diminishing the consumption of

Y commodity-X
13. Which of the following statements regarding utility is not true? [1]

a) It is purely a subjective entity. b) It is a satisfying power of a commodity.

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c) It helps consumers to make choices. d) Utility is always measurable.
14. The concept of marginal utility was developed by? [1]
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a) Alfred Marshall b) Robbins

c) Hicks & Allen d) Paul Samuelson

15. A curve which first moves upwards then downwards is__________? [1]

a) Demand curve b) Indifference curve

c) Total utility curve d) Marginal utility curve

16. What is called point of satiety? [1]

a) The point where marginal utility becomes b) None of above

less than zero

c) The point where marginal utility becomes d) The point where marginal utility becomes
greater than zero zero.
17. A budget constraint line is a result of? [1]

a) Market price of commodity X b) Income of the consumer

c) Market price of commodity Y d) All of above

18. _____________ is the addition to total utility by the consumption of one additional unit of the commodity? [1]

a) Marginal utility b) Ordinal utility

c) Total utility d) Average utility

19. A shift in the budget line, when prices are constant, is due to: [1]

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 a) change in income b) change in utility

c) change in dema d) change in preferences

20. Utility is measured in terms of? [1]

a) Gram b) Centimeter

c) Seconds d) Utils
21. Ordinal concept of utility expresses utility in terms of: [1]

a) none of these b) constants

c) level of satisfaction d) units

22. Indifference curve represents? [1]

a) Only two commodities b) Less than two commodities

c) Four commodities d) More than two commodities

23. At the point of tangency the slope of the indifference curve is ___________? [1]

a) Greater than the price line b) None of these

c) Less than the price line d) The same as the price line
24. As we move along the indifference curve (left to right), the slope of IC tends to: [1]

a) decline b) unity
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c) rise d) zero
25. Consumer’s surplus is also known as? [1]
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a) Elasticity of demand b) Buyer’s surplus

c) Indifference surplus d) Differential surplus

26. Law of Equi-marginal utility is called: [1]

a) Law of substitution b) None of these

c) Law of increasing utility d) Law of diminishing utility

27. What will you say about MU when TU is maximum? [1]

a) It will be zero b) It will be negative

c) It will be one d) It will be infinity

28. A consumer reaches equilibrium when? [1]
MUyx MUy MUxy MUy
a) = b) =
Px Py Py Py

MUy MUy
c) MUx
= d) MUx
=
Px Py Py Py

29. The process of using up utility value of goods and services for the direct satisfaction of our wants: [1]

a) Production b) Economic

c) Utility d) Consumption
30. Which is the First Law of Gossen? [1]

a) Law of Demand b) Consumer’s Surplus

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 c) Law of Equi-marginal Utility d) Law of Diminishing Marginal Utility
31. An indifference curve is always? [1]

a) Concave to the origin b) L-shaped

c) Convex to the origin d) A vertical straight line

32. The tangency between price line and indifference curve shows? [1]
Py
a) MRS=P b) MRSxy = Px

c) Marginal rate of substitution equals to d) MRSxy =

Px

Py

income
33. Which of the following utility approach suggests that utility is a measurable and quantifiable entity? [1]

a) Both cardinal & ordinal b) Ordinal approach

c) Cardinal approach d) None of these

34. Marginal utility curve of a given consumer is also his? [1]

a) Demand curve b) Supply curve

c) Indifference curve d) Total utility curve

35. If the consumer consumes only one commodity 'X', he will be in equilibrium when: [1]

a) none of these b) MUx < Px

ce
c) MUx > Px d) MUx = Px

36. Match the following: [1]

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(i) Change the quantity of the

(a) Total Utility of a commodity is maximum when
commodity

(b) Marginal Utility of a commodity (ii) Total utility starts diminishing

(iii) Always decreases with increase

(c) When marginal utility is negative, total utility
in quantity

(d) As per consumer's equilibrium theory, to reach consumer's

(iv) Marginal utility is zero
equilibrium a consumer can

37. Match the following: [1]

(a) Indifference curves are convex to the point of origin due to : (a) the sum of marginal utilities

(b) If Marginal Rate of Substitution is constant throughout, the (b) the utility from the last unit
indifference curve will be: consumed

(c) Downward sloping straight

(c) Marginal utility is
line

(d) Total utility is (d) Decreasing MRT

38. Identify the correct sequence of alternatives given in Column II by matching them with respective items in [1]
Column I:

Column I Column II

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 (i) Indifference curve (a) ΔY

ΔX

(ii) Consumer's equilibrium (b) Budget line rotates to the right starting from the Y-axis

(iii) Slope of IC (c) Diagrammatic presentation of an indifference set of a consumer

(iv) PX falls (d) Consumer should move downward to the right along the IC
PX
(v) M RS XY >
PY
(e) Optimum choice of the consumer

39. Identify the correct sequence of alternatives given in Column II by matching them with respective items in [1]
Column I:

Column I Column II

(i) Cardinal measurement of utility (a) When consumption of an additional unit leads to dissatisfaction

(ii) TU (b) Utility measured in terms of cardinal numbers

MUx MUy
(iii) MU curve (c) P8
=
Py
= M UM

(iv) Negative MU (d) Slopes downwards from left to right

(v) Consumer equilibrium (e) Σ MU

40. Match the following: [1]

(a) In case of two commodities a consumer strikes equilibrium

(i) Increase in the number of buyers
when
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(ii) Marginal utility becomes more than
(b) Number of Budget sets of a consumer are
price
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(c) A consumer demands more quantity of a commodity when (iii) Limited, depends upon price and
price decreases because income of consumer
MUY
(d) Demand curve shifts rightward in case of (iv)
MUx
= = M Um
PX Py

41. Match the following: [1]

(a) Total utility is maximum when (i) MRS is constant

(b) The consumer is in equilibrium at a point where the (ii) Right angled triangle formed by the budget line
budget line with the axes.

(c) Budget set is (iii) Is tangent to an

(d) If indifference curve is straight line downward

(iv) Marginal utility is zero.
sloping,

42. Match the following: [1]

(a) A consumer has monotonic preferences, find the most preferred

(i) Zero
bundle by him

(b) Slope of the demand curve is zero, its elasticity of demand is (ii) Maximum

(iii) The elasticity of demand is

(c) What is the value of total utility at the point of satiety
infinity

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 (d) What is the value of marginal utility at the point of satiety (iv) 6 units of X good and 6 units of
Y good

43. State True or False: [32]

(i) Total utility is maximum when marginal utility starts declining. [1]
(ii) Consumer equilibrium can be determined only if the law of diminishing marginal utility holds good. [1]
(iii) When the price line is tangent to the indifference curve, the consumer is said to be in equilibrium. [1]
MUX
(iv) A consumer strikes his equilibrium when: = MUM in case of two commodities. [1]
PX

(v) Two indifference curves can cut each other. [1]

(vi) TU is the sum total of MU from all units of consumption of a commodity. [1]
(vii) In an indifference map, higher IC always points to higher level of satisfaction. [1]
(viii) A consumer is in equilibrium and buys commodities X and Y. When the price of X falls, he starts [1]
buying more of X than Y.
(ix) Consumer's budget is the specified income of the consumer. [1]
PX
(x) A consumer strikes his equilibrium when: MRS XY =
PY
. [1]
PX MUX PX MUX
(xi) A situation when > is better than when = . [1]
PY MUY PY MUY

(xii) The indifference curve is not convex to the origin in the case of two normal goods. [1]
(xiii) Measurement of utility in cardinal numbers is a serious limitation of utility analysis. [1]
(xiv) The total utility will increase even when marginal utility decreases. [1]
(xv) MU must diminish as more and more standard units of a commodity are continuously consumed. [1]
(xvi) Slope of the indifference curve shows MRS. [1]
ce
PX PX
(xvii) A situation when MRS XY >
PY
is better than when MRS XY =
¯¯
¯
. [1]
PY

MUX MUY
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(xviii) If PX
>
PY
, the consumer should buy more of commodity-Y and less of commodity-X. [1]
(xix) A consumer strikes his equilibrium by equating the price of the commodity with total utility derived [1]
from the commodity.
(xx) If IC is convex to the origin, MRS should not be diminishing. [1]
(xxi) An increase in income of the consumer is the only cause that leads to a parallel shift of budget line to [1]
the right.
(xxii) All points on the indifference curve offer equal satisfaction to the consumer. [1]
(xxiii) In the case of the consumption of two commodities, equilibrium is attained when the rupee worth of [1]
satisfaction is the same across both the goods.
(xxiv) The rate at which the consumer can substitute Good-X for Good-Y tends to decline as we move [1]
downward along the price line.
(xxv) Unless MUM is assumed to be constant, the equilibrium of the consumer cannot be specified. [1]
(xxvi) All attainable combinations of Good-X and Good-Y are below the budget line of a consumer. [1]
(xxvii) Feasible combinations of goods are those combinations that a consumer can always buy, no matter [1]
what his income is.
(xxviii)The budget line is also known as the price line. [1]
(xxix) The total utility starts diminishing when marginal utility begins to diminish. [1]
(xxx) An indifference curve to the right and above another indifference curve represents a higher level of [1]
satisfaction.
(xxxi) Total utility is the sum total of marginal utilities. [1]
(xxxii) A consumer strikes his equilibrium when MUX = MUY = MUM, in the case of two commodities, and [1]

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when PX and PY are not equal.

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