SAHAY INSTITUTE

CONSUMER’S EQUILBIRUM
Chapter - 02

Multiple Choice Questions

1 The want satisfying power of a good is known as ………………….

(a) Utility
(b) Usefulness
(c) None of (a) and (b)
(d) Both (a) and (b)

2 Cardinal utility approach was given by ………………

(a) Prof. Alfred Marshall

(b) Prof. Hicks
(c) Prof. Samuelson
(d) Prof. Gossen
3 The unit of utility is known as …

(a) marginal utility

(b) MUM
(c) utils
(d) None of these

4 Which of the following is/are the feature(s) of utility?

(a) Subjective in nature

(b) Depending upon of urgency of wants
(c) Both (a) and (b)
(d) None of (a) and (b)

5 When MU is zero, TU will be

(a) maximum
(b) maximum and constant
(c) constant
(d) minimum

6 When total utility increases at a diminishing rate, marginal

utility will be

(a) increasing
(b)diminishing
(c) constant
(d) diminishing but positive

7 If a consumer is in equilibrium consuming one commodity,

how will he respond to a fall in price of the commodity?

(a) Decrease the consumption of the commodity

(b) Increase the consumption of the commodity
(c) Consumption will remain constant
(d) None of the above

8 The law of Equi-marginal utility considers price of money as

(a) Zero
(b) Less than one
(c) More than one
(d) One

9 Law of Equi-Marginal utility is a law of

(a) Production of Wealth

(b) Consumption of Wealth
(c) Distribution of Wealth
(d) Exchange of Wealth

10 Utility is same as Usefulness". Which of the below options

fits the given statement?

(a) Always true

(b) Partially true
(c) False
(d) Incomplete

11 A consumer is in equilibrium, how will a consumer behave if

MUX/Px<MUX/Px?

(a) Consumer will consume more of Good X and less of

Good Y
(b) Consumer will consume more of Good Y and less of
Good x
(c) Consumer more of both Good
(d) Consumer less of both Good

12 According to cardinal measurement of utility

(a) Utility is quantitative
(b) Utility is qualitative
(c) Utility is both quantitative and qualitative
(d) Utility is constant

13 Utility can be measured by

(a) Money
(b) Exchange of goods
(c) Weight of the good
(d) None of the above
14 Law of equi-marginal utility is called

(a) Law of increasing utility

(b) Law of diminishing utility
(c) Law of substitution
(d) None of the above

15 Consumer's equilibrium takes at a point where

(a) MU = Price
(b) MU <Price
(c) MU > Price
(d) None of these

16 Total Utility derived from consumption of commodity will

begin to fall ..…

(a) with every additional unit consumed

(b) when Total Utility curve becomes flat
(c) when Marginal Utility starts falling
(d) when Marginal Utility becomes negative

17 ... ..... curve is a downward sloping curve cutting the X-axis.

(a) Marginal Utility
(b) Total Utility
(c) Average Utility
(d) Both (a) and (c)

18 Utility approach is ……………

(a) cardinal
(b) ordinal
(c) both cardinal and ordinal
(d) None of the above

19 Exceptions to law of diminishing marginal utility include

(a) reading
(b) money
(c) acquiring knowledge
(d) All of these

20 In accordance with the relationship between Total Utility

and Marginal Utility, when MU is negative then

(a) TU increases
(b) TU decreases
(c) TU remains constant
(d) TU becomes zero

21 A consumer buys two commodities X and Y, he would be in

equilibrium when ..…

MUx MUy
a) Px = Py

MUx
b) MUy = MUm
 MU x MUy
c) Px = Px

Px
d) Py = MUm

22 In case of single commodity, the consumer will be in

equilibrium when .…

MUx
(a) MUy = MUm

MUx
(b) Px = MUm

Px
(c) Py = MUx

(d) MUx = MUm

23 Which of the following is not correct about consumer

equilibrium through utility analysis?

(a) Law of Marginal Utility does not operate

(b) MUM remains constant
MU x
(c) Px = MUm
(d) Consumer is rational

24 Which of the following is an assumption of equilibrium

(through utility analysis) ?

(a) Rationality
(b) The cardinal measurability of utility
(c) Constancy of the MU of money
(d) All of the above
25 In case of single commodity, a consumer is at equilibrium
point, marginal utility derived from consumption of
commodities is 12, find and the the price of that commodity?
(when MUm = 1)

(a) ₹1
(b) ₹2
(c) ₹12
(d) ₹10