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Theory of Consumer Behaviour MCQ Test

HOME > Economics MCQ > Unit 2 MCQ Test

CA Foundation · Paper 4 · Business Economics

Chapter 2 · Unit 2 · Theory of Consumer Behaviour

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Question 01
Utility in economics means:
In economics, utility means the want-satisfying capacity of a good. It is ethically neutral. :contentReference[oaicite:1]{index=1}
Question 02
The marginal utility analysis of consumer behaviour was developed by:
Marginal utility analysis is associated with Alfred Marshall. :contentReference[oaicite:2]{index=2}
Question 03
The indifference curve analysis of consumer behaviour was developed by:
ICAI’s unit names Hicks and Allen for indifference curve analysis. :contentReference[oaicite:3]{index=3}
Question 04
Total utility refers to:
Total utility is the aggregate satisfaction obtained from all units consumed.
Question 05
Marginal utility means:
Marginal utility is the addition to total utility from an extra unit consumed.
Question 06
The law of diminishing marginal utility states that as more units of a commodity are consumed, marginal utility:
This is the core of the law of diminishing marginal utility: each additional unit gives less extra satisfaction.
Question 07
Total utility is maximum when marginal utility is:
This is a standard ICAI-style MCQ. Total utility reaches maximum when marginal utility becomes zero. :contentReference[oaicite:4]{index=4}
Question 08
If marginal utility becomes negative, total utility will:
Negative marginal utility means each extra unit reduces total satisfaction, so total utility falls.
Question 09
The law of diminishing marginal utility assumes that:
Homogeneous units, rational consumer and unchanged tastes are among the standard assumptions.
Question 10
Consumer equilibrium under the single-commodity case is achieved when:
A consumer stops buying when the marginal utility in money terms equals the price of the commodity.
Question 11
The law of equi-marginal utility suggests that a consumer maximises satisfaction by equalising:
The equi-marginal principle says MUx/Px = MUy/Py = ... for maximum satisfaction.
Question 12
For two goods X and Y, consumer equilibrium under cardinal utility analysis requires:
This is the standard equilibrium condition under the Marshallian approach.
Question 13
Consumer surplus is the difference between:
Consumer surplus measures extra benefit enjoyed by consumer over the actual market price paid.
Question 14
Consumer surplus tends to be larger for goods whose demand is:
Consumer surplus is generally larger when consumers are willing to pay much more than the market price, often seen in inelastic demand situations.
Question 15
The indifference curve shows combinations of two goods that give the consumer:
An indifference curve consists of combinations of two goods that yield the same level of satisfaction.
Question 16
Which of the following is a property of indifference curves?
Indifference curves are downward sloping because if one good decreases, more of the other is needed to maintain the same satisfaction.
Question 17
Why can two indifference curves not intersect?
If indifference curves intersect, the same bundle would imply two different satisfaction levels, which is impossible.
Question 18
Higher indifference curves represent:
A higher indifference curve contains bundles with more of at least one good, implying greater satisfaction.
Question 19
Marginal rate of substitution (MRS) refers to:
MRS measures willingness to substitute one commodity for another while maintaining same satisfaction.
Question 20
The usual shape of an indifference curve reflects:
Convexity of indifference curves arises because MRS diminishes as the consumer substitutes one good for another.
Question 21
A budget line represents:
The budget line shows the consumption possibilities open to a consumer at given prices and income.
Question 22
If consumer income increases, the budget line will:
With more income and unchanged prices, purchasing capacity rises, so the budget line shifts outward parallelly.
Question 23
If price of one good falls while income and other price remain constant, the budget line will:
A fall in price of one good changes only one intercept, so the budget line rotates.
Question 24
Consumer equilibrium under indifference curve analysis occurs where:
At equilibrium, the highest attainable indifference curve just touches the budget line.
Question 25
At consumer equilibrium under indifference curve analysis:
Tangency condition gives MRSxy = price ratio Px/Py.
Question 26
If an indifference curve is a straight line, the two goods are likely to be:
Perfect substitutes have constant MRS, so the indifference curve becomes a straight line.
Question 27
If an indifference curve is L-shaped, the goods are likely to be:
Perfect complements are consumed in fixed proportions, giving right-angled indifference curves.
Question 28
Which of the following assumptions is associated more with cardinal utility analysis than with indifference curve analysis?
Marshall’s cardinal analysis assumes utility can be measured numerically, unlike ordinal indifference analysis. :contentReference[oaicite:5]{index=5}
Question 29
Which statement is correct regarding consumer equilibrium under both approaches?
Both theories explain how a rational consumer allocates limited income to achieve maximum satisfaction. :contentReference[oaicite:6]{index=6}
Question 30
A consumer consumes two goods X and Y. If MUx = 20, MUy = 10, Px = ₹4 and Py = ₹2, what should the consumer do to reach equilibrium?
Check equilibrium condition: MUx/Px = 20/4 = 5 and MUy/Py = 10/2 = 5. Since both are equal, the consumer is already in equilibrium.

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MCQ Test · Chapter 2 · Unit 2 · Theory of Consumer Behaviour

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