managerial economics MCQs for practice .

unit 1 managerial economics mcqs

1. FORMATIVE ASSESSMENT CO 2 MB11020 MANAGERIAL ECONOMICS

2. The Equi -Marginal Principle helps consumers: a ) Maximize utility b ) Minimize costs c ) Balance income and expenses d ) Compare two goods' prices

3. According to the Equi Marginal Principle, consumers maximize satisfaction when: a ) Marginal utilities of different goods are equal b) Marginal utility per dollar spent is equal for all goods c) The price of one good is higher than others d) They spend all their income on one good

4. The Equi Marginal Principle applies to: a ) Only luxury goods b) Any combination of goods c) Goods with equal prices d) Services only

5. If a consumer is not maximizing utility, the Equi Marginal Principle suggests they should: a ) Shift spending to goods with a higher marginal utility per rupee b) Stop consuming the good with the highest price c) Reduce total spending d) Save money instead

6. When income changes, according to the Equi Marginal Principle: a ) Consumption changes proportionally for all goods b) Marginal utility per rupee spent remains unchanged c) Consumption patterns adjust to maximize utility d) Total utility is minimized

7. If the marginal utility per rupee of good A exceeds that of good B, a rational consumer should: a ) Buy more of good A and less of good B b) Buy more of good B c) Continue spending equally on both d) Stop buying good A

8. The marginal utility of a good is: a ) The additional satisfaction from consuming one more unit b) The cost of one more unit c) The utility from the first unit d) Total utility divided by quantity consumed

9. The Equi Marginal Principle helps firms by: a ) Minimizing input costs b) Allocating resources efficiently between different uses c) Increasing marginal revenue d) Reducing total production

10. If a consumer's marginal utility from an additional unit of good X falls, the Equi Marginal Principle suggests: a ) Buy less of good X b) Buy more of good X c) Continue buying at the same rate d) Switch to another good

11. Which of the following is true about the Equi -Marginal Principle? a) It does not consider the budget constraint b ) It assumes diminishing marginal utility c ) It leads to under-consumption of goods d ) It applies only when prices are constant

12. When using the Equi -Marginal Principle, if the price of good X increases: - a) The consumer will buy more of X - b) The marginal utility of X will decrease - c) The consumer will buy less of X - d) Total utility will increase

13. The Equi -Marginal Principle assumes that: a ) Prices of goods are constant b) Marginal utility of income is constant c ) Total utility is independent of budget allocation d) Consumers maximize utility based on budget constraint

14. The Equi -Marginal Principle can be applied to: - a) Only consumer behavior - b) Production choices - c) Both consumption and production - d) Only budgeting processes

15. Utility refers to: a ) The satisfaction a consumer receives from a good b) The price of a good c) The cost of production d) The quality of a good

16. The Law of Diminishing Marginal Utility states that: a ) Additional units of a good provide less satisfaction b) Utility increases as more units are consumed c) Prices rise with increased consumption d) Total utility decreases after consuming the first unit

17. An indifference curve shows: a ) Combinations of goods providing equal satisfaction b) Different prices for the same good c) The income expenditure ratio d) Preferences for a single good

18. The slope of an indifference curve is: a ) Marginal Rate of Substitution (MRS) b) Price ratio c) Income ratio d) Total utility

19. Indifference curves are typically: a ) Convex to the origin b) Concave to the origin c) Straight lines d) L shaped

20. A higher indifference curve represents: a ) Higher utility b) Lower utility c) The same utility d) No preference between goods

21. The Marginal Rate of Substitution (MRS) is the rate at which: a ) A consumer is willing to trade one good for another while maintaining the same utility b) The price of one good changes relative to another c) Utility increases with each additional good consumed d) Total income changes

22. Indifference curves never intersect because: a ) They represent different levels of utility b) Utility is constant along each curve c) Preferences are always changing d) Consumers have unlimited income

23. Indifference curves are: - a) Upward sloping - b) Downward sloping - c) L-shaped - d) Vertical

24. Two indifference curves: - a ) Can intersect - b) Can never intersect - c) Are parallel to each other - d) Are linear

25. Which of the following is true for cardinal utility? - a ) Utility can be measured in units - b) Utility cannot be measured - c) Only preference ranking is required - d) None of the above

26. Ordinal utility assumes that : - a) Utility can be measured in numerical units - b) Consumers can rank their preferences - c) Marginal utility is constant - d) Utility is directly proportional to income

27. Cardinal utility theory is associated with: - a) Alfred Marshall - b) John Hicks - c) Paul Samuelson - d) Vilfredo Pareto

28. Ordinal utility theory is associated with : a ) Alfred Marshall - b) John Hicks - c) Paul Samuelson - d) Vilfredo Pareto

29. Consumer surplus is the difference between: - a) Price paid and cost of production - b) Price paid and price willing to pay - c) Price willing to pay and price paid - d) Total expenditure and total utility

30. Consumer surplus is maximized when: - a) Price is equal to marginal cost - b) Marginal utility equals price - c) Consumers are able to pay less than what they are willing to pay - d) Price is greater than marginal cost

31. A rise in the price of a good will: - a) Increase consumer surplus - b) Decrease consumer surplus - c) Have no effect on consumer surplus - d) Increase both demand and consumer surplus

32. Consumer surplus is higher when: - a) Prices are lower than expected - b) Prices are higher than expected - c) Supply decreases - d) There is a shortage in the market

33. Consumer surplus can be increased by: - a) An increase in supply - b) A decrease in demand - c) An increase in prices - d) A decrease in prices

34. If the price of a good falls, consumer surplus : - a) Decreases - b) Increases - c) Remains constant - d) Fluctuates unpredictably

35. Consumer surplus can be zero when: - a) Demand is perfectly elastic - b) Demand is perfectly inelastic - c) Price is equal to the highest price consumers are willing to pay - d) Supply is perfectly elastic

36. If a consumer is willing to pay $10 for a product but pays only $7, their consumer surplus is: a ) $3 b) $10 c) $7 d) $17

37. If there is a reduction in supply and prices rise, consumer surplus will:   a ) Decrease b) Increase c) Remain unchanged d) Become infinite

38. The budget line shows:   a ) All combinations of two goods that a consumer can purchase with a given income b) The maximum utility a consumer can achieve c) Only the highest priced good a consumer can afford d) A consumer’s preference for one good over another

39. If a new technology lowers the cost of producing a good, what happens to consumer surplus?   a ) It increases, as prices are likely to fall b) It decreases, as consumers have less income c) It stays the same, regardless of technology d) It becomes zero

40. The concept of consumer surplus is most closely related to which economic theory?   a ) Marginal utility b) Law of diminishing returns c) Theory of comparative advantage d) Profit maximization

41. One of the key assumptions of a budget line is that a consumer: a ) Purchases only two commodities b) Purchases as many commodities as they like c) Consumes one commodity and saves the rest of their income d) Is indifferent to the number of commodities

42. The budget line assumes that the market price of each commodity is: a ) Known and fixed b) Unknown to the consumer c) Changing with demand d) Variable based on the consumer’s income

43. Consumer surplus is graphically represented by the area: - a) Above the demand curve and below the price - b) Below the demand curve and above the price - c) Above the price and below the demand curve - d) Below the price and above the supply curve

44. THANK YOU