What is the definition of utility?

• The total amount of money spent

• The quantity of goods consumed

• The level of satisfaction derived from consumption

• The price of a commodity

According to the cardinal utility theory, how is utility measured?

• In arbitrary units called utils

• In terms of preference ranking

• In terms of market prices

• In absolute terms

What does the law of diminishing marginal utility state?

• Utility is the same for all consumers

• Utility decreases with each additional unit consumed

• Utility remains constant regardless of consumption

• Utility increases with each additional unit consumed

What is marginal utility?

• The maximum satisfaction achievable

• The change in total utility from consuming one more unit

• The average satisfaction from all units consumed

• The total satisfaction from all units consumed

What is the main assumption of the cardinal utility theory?

• Utility cannot be measured

• Consumers are irrational

• Utility is ordinal and not measurable

• Consumers aim to maximize satisfaction

In the context of consumer equilibrium, what does MUx = Px signify?

• Marginal utility is greater than price

• Marginal utility equals price

• Total utility is maximized

• Price is less than total utility

What is the difference between utility and usefulness?

• Utility is measurable; usefulness is not

• Utility is constant; usefulness varies

• Utility is subjective; usefulness is objective

• Usefulness is about consumer satisfaction; utility is not

What does the ordinal utility theory allow consumers to do?

• Calculate total utility precisely

• Determine the exact satisfaction level

• Measure utility in absolute terms

• Rank their preferences for various commodities

What happens to total utility when a consumer reaches the saturation point?

• Total utility becomes negative

• Total utility remains constant

• Total utility decreases

• Total utility continues to increase

What is the assumption of transitivity in consumer choice?

• If A is preferred to B, then B is preferred to A

• If A is preferred to B and B to C, then A is preferred to C

• If A is equal to B, then A is preferred

• If A is less than B, then B is preferred