Quiz on Marginal Utility and Economic Principles

What is marginal utility?

• the overall satisfaction that is derived from the consumption

• the additional utility derived from the consumption

• total utility by reallocating expenditure between any of the products

• measure of the level of happiness or satisfaction

The marginal utility of a good is zero. This means:

• the good gives no satisfaction to the consumer.

• the price of the good is zero

• the consumer is in equilibrium.

• total utility is maximised.

What does the slope of an indifference curve represent?

• The marginal rate of substitution between the two goods.

• The total utility derived from both goods.

• The cost of purchasing the goods.

• The expenses incurred from both the goods.

In a two-good world, how is the equi-marginal principle mathematically represented?

• MUx/Px = MUy/Py

• MUx + MUy = Px + Py

• MUx = MUy

• TU = MU

What is an inferior good?

• A good for which demand increases as consumer income rises.

• A good for which demand decreases as consumer income rises.

• A good that has no change in demand regardless of changes in consumer income.

• A good that is considered lower in quality but still preferred by all consumers.

What does a budget line represent?

• The total utility a consumer can achieve from various combinations of goods.

• The different combinations of two goods a consumer can purchase given their income and the prices of the goods.

• The amount of money a consumer has to spend on a single good.

• The maximum price a consumer is willing to pay for a good.

What does the Marginal Rate of Substitution represent?

• The total satisfaction gained from consuming an additional unit of a good.

• The rate at which a consumer is willing to give up one good for another while maintaining the same level of satisfaction.

• The price ratio of two goods in the market.

• The total cost of buying additional units of a good.

If the price of both goods increases, what happens to the budget line?

• The budget line shifts outward.

• The budget line becomes steeper.

• The budget line pivots outward.

• The budget line shifts inward.

If a consumer's preferences for both goods improve, how does this affect the indifference curve?

• The indifference curve shifts inward.

• The indifference curve becomes steeper.

• The indifference curve shifts outward.

• The indifference curve becomes flatter.

Which principle states that as more of a good is consumed, the additional satisfaction from each additional unit decreases?

• Law of Supply

• Law of Demand

• Law of Diminishing Marginal Utility

• Law of equi marginal utility