# Micro Economics Quiz ## Micro Economics question and answer:

Ques. The slope of a budget line throughout its length is
(a) The satisfaction level of both the commodities
(b) The income level of the consumer
(c) The price ratio of both the commodities under consideration
(d) Price level of a country

Ans. (c)

Ques. The slope of a budget line is
(a) The satisfaction level of both the commodities
(b) The income level of the consumer
(c) The price ratio of both the commodities under consideration
(d) Price level of a country

Ans. (c)

Ques. Ordinal utility analysis is otherwise known as
(a) Gossens second law
(b) Cardinality approach
(c) Indifference curve analysis
(d) Rationality approach

Ans. (c)

Ques. When individuals income falls (everything remain the same) his demand for an inferior good?
(a) Rises
(b) Falls
(c) Remains the same
(d) We cannot say without additional information

Ans. (a)

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Ques. Marginal utility is
(a) Always zero
(b) Increases at a diminishing rate
(c) The utility derived from last unit
(d) All the above

Ans. (c)

Ques. The substitution effect for a commodity is
(a) Is always positive
(b) Depends upon the nature of the commodity
(c) Depends upon price effect
(d) Sometimes negative and sometimes positive

Ans. (a)

Ques. Which of the following statement is TRUE with regard to total utility
(a) Total utility is the utility derived from last unit
(b) Total utility increases at a diminishing range
(c) As consumption increases total utility goes on diminishing
(d) At saturation point total utility is negative

Ans. (b)

Ques. The income effect for a commodity is
(a) Is always positive
(b) Is always negative
(c) Depends upon price effect
(d) Determines the nature of the commodity

Ans. (d)

Ques. When individuals income rises (everything remain the same) his demand for a normal good?
(a) Rises
(b) Falls
(c) Remains the same
(d) negative

Ans. (a)

Ques. When price of a product falls, more of it is purchased because of
(a) The substitution effect
(b) The income effect
(c) Neither substitution effect nor income effect
(d) Both the substitution and income effects

Ans. (d)

Ques. Total utility curve
(a) Always rises
(b) First falls then rises
(c) Always falls
(d) First rises and then falls after reaching its maximum

Ans. (d)

Ques. According to Hicks substitution effect is
(a) The movement to a higher indifference curve
(b) The movement to a lower indifference curve
(c) The movement along an indifference curve
(d) The movement to a decreased consumption

Ans. (c)

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Ques. If negative income effect is greater than positive substitution effect : price effect will be
(a) Zero
(b) Negative
(c) Positive
(d) Positive and greater than one

Ans. (b)

Ques. An indifference curve represent
(a) Four commodities
(b) Less than two commodities
(c) Only two commodities
(d) Only one commodity

Ans. (c)

Ques. At the point of tangency the slope of indifference curve is
(a) Differ from point to point
(b) Is equal on the other side of the midpoint
(c) Is the same
(d) Is increasing

Ans. (c)

Ques. When Total utility is increasing at an decreasing rate, marginal utility is
(a) Constant
(b) Negative
(c) Increasing
(d) Decreasing

Ans. (d)

Ques. If negative income effect is less than positive substitution effect : the product will be
(a) A normal good
(b) An inferior good
(c) A giffen good
(d) A complementary good

Ans. (b)

Ques. In the fundamental theorem of consumption and to prove the law of demand, Samualson uses
(a) Compensating variation in income
(b) The cost difference
(c) The over compensation effect
(d) Substituting variation in price

Ans. (c)

Ques. Price effect is
(a) Income effect – substitution effect
(b) Substitution effect – income effect
(c) Income effect + substitution effect
(d) Income effect + substitution effect- negative effects

Ans. (c)

Ques. A consumer reaches equilibrium when
(a) Marginal utility is equal to price
(b) Marginal utility greater than price
(c) Marginal utility less than price
(d) Total utility is equal to price

Ans. (a)

Ques. Total utility is
(a) The sum total of marginal utilities
(b) Entire utility derived from whole consumption
(c) Increases at a diminishing rate
(d) All the above

Ans. (d)

Ques. What are consumption goods?
(a) Goods used for consumption in the production process
(b) Goods such as tools, machinery, etc which are used to create final consumption goods
(c) Goods and services that are consumed fully when purchased by the consumers
(d) None of the above

Ans. (c)

Ques. At saturation point MU of a commodity is
(a) Positive
(b) Negative
(c) Zero
(d) Increasing

Ans. (c)

Ques. Intermediate goods are not included to calculate the final output because:
(a) they do not have value
(b) they have unknown value
(c) their value is included in final goods so they are not added to avoid the problem of double counting
(d) none of the above

Ans. (c)

Ques. Strong ordering means
(a) Absence of indifference
(b) Presence of indifference
(c) No difference between different combinations
(d) None of the above

Ans. (a)

Ques. What are Capital goods?
(a) Goods used for consumption in the production process
(b) Goods such as tools, machinery, etc which are used to create final consumer goods
(c) Goods and services that are consumed fully when purchased by the consumers
(d) None of the above

Ans. (b)