#1
In the context of economic theory, what does the term 'utility' refer to?
The total revenue of a firm
The satisfaction or pleasure derived from consuming goods and services
The cost of production
The total profit of an industry
#2
What role does the indifference curve play in consumer theory?
It represents the budget constraint of a consumer
It shows the combinations of goods that give the consumer equal satisfaction
It illustrates the law of demand
It depicts the relationship between price and quantity demanded
#3
What is the 'Engel's Law' in economics?
The higher the price of a good, the lower the quantity demanded
The lower the income, the higher the proportion of income spent on necessities
The higher the income, the lower the quantity demanded
The lower the price of a good, the higher the quantity demanded
#4
According to the 'revealed preference theory,' how are preferences revealed?
Through explicit statements by consumers.
Through observed choices and actions of consumers.
Through advertisements and marketing strategies.
Through changes in government regulations.
#5
According to the 'Income-Consumption Curve,' how does an increase in income affect consumption?
Consumption increases proportionally with income.
Consumption decreases proportionally with income.
Consumption remains constant regardless of changes in income.
Consumption initially increases, then decreases with a further increase in income.
#6
According to the law of diminishing marginal utility, what happens as a consumer consumes more units of a good or service?
Total utility keeps increasing
Marginal utility increases
Marginal utility decreases
Total utility remains constant
#7
What is the substitution effect in the context of consumer behavior?
The change in quantity demanded due to a change in the price of a good
The change in quantity demanded due to a change in income
The change in quantity demanded due to the availability of substitutes
The change in quantity demanded due to a change in tastes and preferences
#8
What is the difference between cardinal utility and ordinal utility?
Cardinal utility is measurable, while ordinal utility is not measurable
Ordinal utility is measurable, while cardinal utility is not measurable
Both cardinal and ordinal utility are measurable
Neither cardinal nor ordinal utility is measurable
#9
What does the concept of 'budget constraint' represent in consumer theory?
The limit on the quantity of a good that a consumer can purchase
The limit on the total expenditure a consumer can incur
The limit on the consumer's income
The limit on the prices of goods and services
#10
What is the concept of 'consumer equilibrium' in economics?
When a consumer is perfectly happy with their current consumption and does not desire any changes
When a consumer maximizes their total utility given their budget constraint
When a consumer purchases all available goods and services in the market
When a consumer faces a budget deficit and adjusts their consumption accordingly
#11
Explain the concept of 'income effect' in the context of a price change.
The change in quantity demanded due to a change in income
The change in quantity demanded due to a change in the price of a good
The change in quantity demanded due to the availability of substitutes
The change in quantity demanded due to a change in tastes and preferences
#12
What is the difference between 'marginal utility' and 'total utility'?
Marginal utility is the satisfaction derived from the last unit consumed, while total utility is the satisfaction from all units consumed.
Marginal utility is the total satisfaction derived from all units consumed, while total utility is the satisfaction from the last unit consumed.
Marginal utility and total utility are the same concepts.
Marginal utility measures the satisfaction of a group, while total utility measures individual satisfaction.
#13
What does the Engel curve depict in consumer theory?
The relationship between price and quantity demanded
The relationship between income and quantity demanded
The relationship between preferences and consumption
The relationship between substitutes and complements
#14
According to the rational choice theory, what assumption is made about consumer behavior?
Consumers always maximize utility
Consumers always make irrational choices
Consumers have unlimited resources
Consumers are indifferent to prices
#15
What is the difference between a normal good and an inferior good?
Normal goods have higher quality than inferior goods
Normal goods have higher prices than inferior goods
Normal goods have a positive income elasticity, while inferior goods have a negative income elasticity
Normal goods have a negative income elasticity, while inferior goods have a positive income elasticity
#16
Explain the concept of 'revealed preference' in consumer theory.
It refers to the preferences that consumers explicitly state in surveys
It is the idea that a person's preferences can be inferred from their observed choices
It is the preferences consumers keep secret from others
It is the preferences that are revealed through advertising
#17
What is the law of diminishing marginal rate of substitution?
As a consumer consumes more of a good, the marginal rate of substitution increases
As a consumer consumes more of a good, the marginal rate of substitution decreases
The marginal rate of substitution is constant regardless of the quantity consumed
The marginal rate of substitution is zero
#18
Define the concept of 'revealed preference' in consumer theory.
It refers to the preferences that consumers explicitly state in surveys
It is the idea that a person's preferences can be inferred from their observed choices
It is the preferences consumers keep secret from others
It is the preferences that are revealed through advertising
#19
What is the significance of the 'income elasticity of demand' in consumer theory?
It measures the responsiveness of quantity demanded to a change in the price of a good.
It measures the responsiveness of quantity demanded to a change in consumer income.
It measures the relationship between the quantity demanded and the quantity supplied.
It measures the satisfaction derived from consuming an additional unit of a good.