Marginal Utility Analysis and Utility

1.A consumer will be in equilibrium when he spends his given income on the
purchase of different goods in such a way so as to maximize his ________
(a) Marginal Utility
(b) Demand
(c) Cardinal Utility
(d) Total Utility

2.______ refers to the want satisfying power of a commodity

(a) Supply
(b) Demand
(c) Utility
(d) Indifference Curve

3.Which one of the following is NOT a characteristic of Utility

(a) Utility is Relative
(b) Utility is same as demand
(c) Utility is different from usefulness
(d) Utility is subjective

4. A consumer will be _______ when he spends his given income on the purchase of
different goods in such a way to maximize his total utility
(a) satisfied
(b) in a state of rest
(c) in equilibrium
(d) all of the above

5. A consumer will maximize his total utility when he allocates his income among
various commodities in such a way that the _________ utility of the last rupee spent
on each commodity is ______
(a) total, equal
(b) marginal, unequal
(c) marginal, equal
(d) Total, unequal

6. Utility refers to the _______ of a commodity

(a) price
(b) want-satisfying power
(c) weight
(d) none of the above

7. Since utility is _______, it cannot be measured in objective terms

(a) relative
(b) Subjective
(c) a power
(d) none of the above
8.Smoking a cigarette has harmful effects on a person, even after this, why does it
possess utility.
 (a) Utility is not measurable
(b) Utility is abstract
(c) Utility is different from usefulness
(d) none of the above

9. What is the formula for calculating M.U of nth term ?

(a) TU n + TU n+1
(b) TU n – TU n+1
(c) TU n – TU n-1
(d) TU n – TU n -1

10. What is Point of Satiation

(a) Point at which TU Is maximum
(b) Point at which MU is least
(c) Point at which MU is maximum
(d) Point at which MU = TU

11. When M.U keeps on decreasing, T.U increases as long as the M.U is
(a) positive
(b) negative
(c) constant
(d) none of the above

12. MU is 0 when,
(a) T.U is increasing
(b) T.U is decreasing
(c) T.U is max
(d) Both b and c

Answer the following with reference to the given schedule

Units of apples Total Utility Marginal Utility

0 0 –
1 10 10
2 16 6
3 20 4
4 22 2
5 22 0
6 19 -3

13. After consuming how many apples is M.U equal to zero

(a) 3
(b) 4
(c) 5
(d) 6

14.After consuming the 6th unit, why does the M.U become negative
(a) Because he has crossed his point of Satiety
(b) Because his taste changed
(c) because the size of the mango increased
(d) none of the above

15. M.U is positive but decreases when T.U

(a) increases at an increasing rate
(b) Decreases
(c) is 0
(d) Increases at a diminishing rate

16.T.U is negative when

(a) M.U is 0
(b) M.U is negative
(c) T.U = M.U
(d) The statement is false

17. Which one of these is NOT true about TU and MU

(a) TU in increases as long as MU is positive
(b) TU is maximum when MU is negative
(c) TU is maximum when MU is zero
(d) TU decreases when MU becomes negative

18. The Law of Diminishing Marginal Utility states that as amount consumed of a
commodity ______, other things being constant, marginal utility _____
(a) increases, Decreases
(b) Increases, Increases
(c) decreases, decreases
(d) decreases, increases

19.Which one of the following are assumptions about the Law of Diminishing
Marginal Utility
(a) All units of a commodity must be identical
(b) The utility is measurable
(c) There should be no change in taste of consumer
(d) All of the above

20. Which of these are exceptions to the Law of Diminishing Marginal Utility
(a) Desire for Money
(b) Food
(c) Water
(d) All of the above