alleryWhen marginal utility is zero, total utility is
- negative
- minimum
- maximum
- zero
Show answer and solution
Correct answer: C. maximum
Total utility is maximum at the point where marginal utility becomes zero
beyond that MU turns negative and TU falls.
CA Foundation Theory of Consumer Behaviour & Demand — practice questions
Explore 34 free Theory of Consumer Behaviour & Demand questions in CA Foundation Economics. Open each question or exercise to read its content, reference answers and available explanation.
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When marginal utility is zero, total utility isRead the answer and worked solution →In neo-classical economics, the term 'utility' is best described as the property of a commodity that gives it the power to:Read the answer and worked solution →Which statement about the nature of utility is correct?Read the answer and worked solution →The Marginal Utility Analysis of consumer behaviour was propounded by:Read the answer and worked solution →Under the cardinal utility approach, utility is assumed to be measured in hypothetical units called:Read the answer and worked solution →Total utility derived from consuming a commodity is correctly expressed as the:Read the answer and worked solution →A consumer's total utility from 3 units of a good is 45 utils and from 4 units is 50 utils. The marginal utility of the 4th unit is:Read the answer and worked solution →At the point of satiation in the consumption of a good, the marginal utility of the last unit consumed is:Read the answer and worked solution →When the marginal utility of a good becomes negative, total utility derived from the good will:Read the answer and worked solution →From the chocolate-bar schedule, total utility is 50 utils at both 4 and 5 units, and 46 utils at 6 units. The marginal utility of the 6th unit is:Read the answer and worked solution →The marginal utility curve is best described as the:Read the answer and worked solution →Which of the following is treated as an apparent exception to the law of diminishing marginal utility?Read the answer and worked solution →In the single-commodity case, a consumer is in equilibrium when the marginal utility of the good is:Read the answer and worked solution →Under the law of equi-marginal utility, a consumer spending on goods X and Y is in equilibrium when:Read the answer and worked solution →The concept of consumer surplus was propounded by:Read the answer and worked solution →Consumer surplus is defined as the difference between the amount a consumer is willing to pay and the amount he:Read the answer and worked solution →The price of good X is Rs.20 and a consumer's marginal utility from the 1st unit is worth Rs.30. The consumer surplus on the 1st unit is:Read the answer and worked solution →Other things remaining the same, a rise in the price of a good will cause the consumer surplus to:Read the answer and worked solution →Which is cited as a limitation of the concept of consumer surplus?Read the answer and worked solution →The indifference curve analysis of demand treats utility as a concept that is:Read the answer and worked solution →An indifference curve represents all combinations of two goods that give the consumer:Read the answer and worked solution →On an indifference map, a curve lying farther from the origin represents:Read the answer and worked solution →The marginal rate of substitution of X for Y at a point on an indifference curve equals:Read the answer and worked solution →Indifference curves are normally convex to the origin because of the principle of:Read the answer and worked solution →When two goods are perfect substitutes, their indifference curves take the shape of:Read the answer and worked solution →For two goods that are perfect complements, such as a left shoe and a right shoe, the marginal rate of substitution is:Read the answer and worked solution →Two indifference curves can never intersect each other because intersection would imply that:Read the answer and worked solution →The slope of the budget line is determined by the:Read the answer and worked solution →A point lying inside (below) the budget line indicates that the consumer is:Read the answer and worked solution →Match each consumer term to its meaningRead the answer and worked solution →
Worked practice questions
In neo-classical economics, the term 'utility' is best described as the property of a commodity that gives it the power to:
- be physically useful
- be morally beneficial
- satisfy a human want
- command a market price
Show answer and solution
Correct answer: C. satisfy a human want
1. Utility is the want-satisfying power of a commodity.
2. It measures the satisfaction a consumer expects from consuming a good.
3. Note that utility is ethically neutral and is not the same as usefulness, so the moral or physical-usefulness options are wrong.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit II "Theory of Consumer Behaviour", p.2_
Which statement about the nature of utility is correct?
- Utility is identical across all consumers always
- Utility is always the same as usefulness
- Utility exists only while a good is consumed
- Utility is subjective and varies from person to person
Show answer and solution
Correct answer: D. Utility is subjective and varies from person to person
1. Utility is a subjective and relative entity, differing from person to person and across time and place.
2. A commodity can have utility even when it is not being consumed, so that option is wrong.
3. Utility is distinct from usefulness, and is not constant across consumers, ruling out the remaining options.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit II "Theory of Consumer Behaviour", p.2_
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