1. What happens to total revenue when price increases and demand is elastic?

A. Total revenue increases B. Total revenue decreases C. Total revenue stays the same D. Revenue is unpredictable

2. If a good’s total revenue decreases when price rises, demand for the good is:

A. Elastic B. Inelastic C. Perfectly elastic D. Unit elastic

3. The condition MUx = Px applies under what circumstance?

A. When total utility is maximized for single commodity consumption B. When supply equals demand C. When income elasticity is zero D. When marginal utility is zero

4. If the income elasticity of demand for a good is negative, this good is classified as:

A. A luxury good B. A normal good C. An inferior good D. A substitute good

5. The main goal of consumers according to microeconomic theory is to:

A. Maximize utility B. Minimize consumption C. Reduce prices D. Increase income

6. The assumption of consistency in ordinalist preference means:

A. Preferences change every period B. Preference order remains the same over time C. Consumers choose randomly D. Preferences cannot be measured

7. What does the transitivity assumption in consumer preference mean?

A. Preferences change randomly over time B. If A is preferred to B and B to C, then A is preferred to C C. Preferences cannot be ranked D. Consumers are inconsistent in choices

8. What does the law of diminishing marginal utility state?

A. Total utility increases infinitely with consumption B. Each additional unit consumed produces less additional satisfaction C. Marginal utility increases as consumption increases D. Utility cannot be ranked

9. Which method is preferred for calculating price elasticity of demand because it uses the average of starting and ending values?

A. Arc elasticity method B. Midpoint method C. Point method D. Total revenue method

10. What is the marginal rate of substitution (MRS)?

A. The rate at which a consumer is willing to trade one good for another while maintaining utility B. The ratio of total utility to quantity consumed C. The price difference between two goods D. The amount of money spent on goods

11. If the price of a good rises 10% and quantity demanded falls 5%, the demand is:

A. Elastic B. Unitary elastic C. Inelastic D. Perfectly elastic

12. If consumer prefers A to B consistently over time, this demonstrates:

A. Irrationality B. Transitivity assumption C. Consistency assumption D. Intransitivity

13. What does the law of diminishing marginal utility imply about total utility as consumption increases?

A. Total utility decreases B. Total utility remains constant C. Total utility increases but at a decreasing rate D. Total utility increases at an increasing rate

14. Which of the following assumptions is central to the Ordinalist theory of consumer behaviour?

A. Utility can be measured using utils B. Consumers maximize utility by equalizing marginal utility to price C. Consumers rank preferences in order rather than measure utility D. Total utility is directly additive across goods

15. Which of the following goods is most likely to have an inelastic demand?

A. Luxury wristwatch B. Ice cream C. Salt D. Private jet

16. What is indicated if cross-price elasticity between two goods is positive?

A. They are complements B. They are substitutes C. They are unrelated D. One is inferior good

17. According to the Cardinalist school, marginal utility is maximized when:

A. Total utility is at its highest level B. Marginal utility equals the price of the commodity C. Marginal utility is zero D. Price equals total utility

18. What happens to total revenue when the demand for a good is elastic and price increases?

A. Total revenue increases B. Total revenue decreases C. Total revenue remains unchanged D. Total revenue fluctuates unpredictably

19. What is the outcome when marginal utility of a commodity equals zero?

A. Consumer gains maximum additional satisfaction B. Total utility is minimized C. Total utility is at maximum D. Price elasticity is zero

20. Which of the following is true about total utility according to the Cardinalist school?

A. It cannot be measured or quantified B. It is the sum of utilities derived from all consumed goods C. It is only relevant when consumers face budget constraints D. It remains constant regardless of quantity consumed

21. Which statement best reflects the ordinalist view of utility?

A. Utility is measured in utils B. Utility can be ranked but not measured C. Utility is not relevant D. Consumers have no preferences

22. What kind of market distortion occurs when government fixes minimum or maximum prices?

A. Strengthened equilibrium B. Market distortion with shortages or surpluses C. Increased consumer surplus D. Increased efficiency

23. Which of the following is NOT an assumption of the Cardinalist school?

A. Utility is measurable B. Utility is additive C. Utility cannot be ranked, only measured D. Diminishing marginal utility applies

24. Which of the following best describes the assumption of transitivity in consumer preferences?

A. If a consumer prefers Good A to B, A must always remain preferred B. Preferences must be consistent over different periods C. If Good A is preferred to B, and B to C, then A is preferred to C D. Consumers are indifferent between goods with equal utility

25. Cross-price elasticity of demand indicates:

A. How demand of one good responds to price changes of another good B. The change in income needed to buy a good C. The ratio of supply to demand for a good D. The cost of production for a good

26. The consumer’s willingness to give up some amount of good Y to obtain more of good X while maintaining utility is known as:

A. Price elasticity B. Marginal utility C. Marginal rate of substitution D. Total utility

27. When price elasticity of demand equals 1, demand is:

A. Elastic B. Inelastic C. Unitary elastic D. Perfectly inelastic

28. Why is the midpoint method preferred for elasticity calculation?

A. It uses estimates rather than actual data B. It averages percentage changes for accuracy, minimizing bias C. It ignores changes in quantity demanded D. It only works for income elasticity

29. What type of good has an income elasticity greater than 1?

A. Inferior good B. Necessity C. Luxury good D. Complementary good

30. What does a price ceiling typically lead to in a market?

A. Surplus B. Shortage C. Increased supply D. Decreased demand

31. In the Ordinalist view, utility is:

A. Measurable in numbers B. Additive across goods C. Ranked in order of preference D. Calculated using utils

32. What is the purpose of a price floor set above equilibrium?

A. To create a shortage B. To create a surplus C. To increase consumer welfare D. To reduce production

33. If the price elasticity of demand is greater than 1, demand is said to be:

A. Inelastic B. Elastic C. Unitary elastic D. Perfectly inelastic

34. What kind of good is indicated when income elasticity is between 0 and 1?

A. Inferior good B. Necessity good C. Luxury good D. Complementary good

35. What does the assumption of rationality imply about consumer behavior?

A. Consumers randomly choose goods B. Consumers always try to maximize utility C. Consumers only buy luxury goods D. Consumers ignore prices

36. What does the midpoint method in elasticity calculation address?

A. It ignores price changes B. It calculates elasticity based on initial values only C. It provides a consistent elasticity measure regardless of direction D. It only works for demand curves

37. Price elasticity of demand measures:

A. How much quantity demanded changes relative to price changes B. The total quantity sold in the market C. The consumer’s income level D. The supply elasticity

38. The point where marginal utility equals price for a commodity means:

A. Consumer is indifferent between goods B. Utility is minimized C. Utility is maximized for that commodity D. Marginal utility is zero

39. What does diminishing marginal rate of substitution imply about consumer preferences?

A. Consumers are willing to give up more of one good for less of another as consumption changes B. Consumers want to consume only one good C. The rate at which they substitute goods remains constant D. Goods are perfect substitutes

40. If the price of a good rises by 10% and quantity demanded falls by 20%, the demand for that good is said to be:

A. Inelastic B. Elastic C. Unit elastic D. Perfectly inelastic

41. According to the price floor concept, setting a price above equilibrium price causes:

A. Shortages B. Surpluses C. Equilibrium D. Perfect competition

42. The Law of Diminishing Marginal Utility implies:

A. Total utility decreases as more units are consumed B. Marginal utility increases with each additional unit consumed C. Marginal utility decreases as more units of a good are consumed D. Utility cannot be measured quantitatively

43. When total utility increases at a decreasing rate, marginal utility is:

A. Constant B. Increasing C. Decreasing D. Zero

44. When the income elasticity of demand is negative, the good is classified as:

A. A luxury good B. A normal good C. An inferior good D. A substitute good

45. Which is a likely consequence of a price ceiling?

A. Excess supply B. Surplus of goods C. Shortage due to excess demand D. Increased producer profits

46. The preference consistency assumption in Ordinal theory means:

A. Preferences do not change over time for the same goods B. Utility can be measured with utils C. Consumers always prefer more goods to fewer goods D. Marginal utility is always positive

47. When price elasticity of supply is calculated using data showing price and quantity increases, it shows:

A. Consumer preferences B. Producer responsiveness to price changes C. Government control measures D. Income effect

48. According to the Cardinalist school, how is utility measured?

A. By ranking preferences B. Using utils as a measurable unit C. By observing income changes D. By counting the number of goods purchased

49. In calculating marginal utility, the formula MUx = (TU2 - TU1)/(Q2 - Q1) represents:

A. Change in price over change in quantity B. Change in total utility over change in quantity C. Total utility per unit consumed D. Price elasticity of supply

50. What is the main focus of the Ordinalist school of thought?

A. Measuring utility with numbers B. Ranking preferences instead of measuring utility C. Ignoring consumer preferences D. Maximizing total output