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This set of Micro Economics 1 Multiple Choice Questions & Answers (MCQs) focuses on Micro Economics 1 Set 1

Q1 | Total utility is maximum when
  • marginal utility is zero
  • marginal utility is maximum
  • marginal utility increases
  • average utility is maximum
Q2 | Which of the following is called gossans first law
  • law of substitution
  • law of equi marginal utility
  • law of diminishing marginal utility
  • none of the above
Q3 | When individuals income falls (everything remain the same) his demand foran inferior good
  • rises
  • falls
  • remains the same
  • we cannot say without additional information
Q4 | If negative income effect is greater than positive substitution effect : theproduct will be
  • a normal good
  • an inferior good
  • a giffen good
  • a complementary good
Q5 | Which of the following statement is FALSE with regard to marginal utility
  • marginal utility is the utility derived from last unit
  • as consumption increases marginal utility goes on diminishing
  • at saturation point marginal utility is zero
  • marginal utility increases at a diminishing range
Q6 | According to Marshall consumer surplus is:
  • total utility – marginal utility
  • total utility + marginal utility
  • total utility derived – price
  • price – marginal utility
Q7 | If both the products X & Y are normal goods
  • slopes down towards right
  • slopes up towards right
  • slopes up towards left
  • slopes down towards left
Q8 | Which of the following statement is TRUE with regard to total utility
  • total utility is the utility derived from last unit
  • total utility increases at a diminishing range
  • as consumption increases total utility goes on diminishing
  • at saturation point total utility is negative
Q9 | If negative income effect is less than positive substitution effect : the productwill be
  • a normal good
  • an inferior good
  • a giffen good
  • a complementary good
Q10 | Which of the following statements is true
  • hicksian substitution effect is greater than slutsky substitution effect
  • slutsky substitution effect is greater than hicksian substitution effect
  • hicksian substitution effect is same and equal to slutsky substitution effect
  • hicksian substitution effect is the reverse of slutsky substitution effect
Q11 | According to Hicks substitution effect is
  • the movement to a higher indifference curve
  • the movement to a lower indifference curve
  • the movement along an indifference curve
  • the movement to a decreased consumption
Q12 | Strong ordering means
  • absence of indifference
  • presence of indifference
  • no difference between different combinations
  • none of the above
Q13 | In the fundamental theorem of consumption and to prove the law of demand,Samualson uses
  • compensating variation in income
  • the cost difference
  • the over compensation effect
  • substituting variation in price
Q14 | If negative income effect is greater than positive substitution effect : priceeffect will be
  • zero
  • negative
  • positive
  • positive and greater than one
Q15 | As per indifference curve analysis consumer equilibrium is attained when
  • slope of indifference curve is constant
  • slopes of both indifference curve and income price line are equal
  • slopes of both indifference curve and income price line are opposite
  • both income price line and indifference curve are parallel.
Q16 | The slope of a budget line is
  • the satisfaction level of both the commodities
  • the income level of the consumer
  • the price ratio of both the commodities under consideration
  • price level of a country
Q17 | At the point of tangency the slope of indifference curve is
  • differ from point to point
  • is equal on the other side of the mid point
  • is the same
  • is increasing
Q18 | The slope of a budget line throughout its length is
  • the satisfaction level of both the commodities
  • the income level of the consumer
  • the price ratio of both the commodities under consideration
  • price level of a country
Q19 | The income effect for a commodity is
  • is always positive
  • is always negative
  • depends upon price effect
  • determines the nature of the commodity
Q20 | The substitution effect for a commodity is
  • is always positive
  • depends upon the nature of the commodity
  • depends upon price effect
  • sometimes negative and sometimes positive
Q21 | Price effect is
  • income effect – substitution effect
  • substitution effect – income effect
  • income effect + substitution effect
  • income effect + substitution effect- negative effects
Q22 | For a giffen good, when price falls
  • demand increases at a faster rate
  • demand decreases
  • demand remains constant
  • demand curve has a negative slope
Q23 | Inferior goods are the goods with
  • falling income effect
  • rising income effect
  • negative income effect
  • positive marshallian effects
Q24 | Indifference curves are
  • always parallel
  • may be parallel
  • may not be parallel
  • both b and c
Q25 | Revealed preference theory assumes
  • weak ordering
  • strong ordering
  • constant ordering
  • multiple ordering