Consumer choice and elasticity MCQs

What does the concept of utility represent in economics?

• Satisfaction or happiness derived from consuming a good or service

• The market price of a product

• The cost of producing a good

• The revenue generated from selling a product

Marginal utility is defined as:

• The total utility derived from all units consumed

• The change in utility from consuming one additional unit of a good

• The cost of consuming additional goods

• The price elasticity of demand

Which of the following explains the law of diminishing marginal utility?

• Consumers value each additional unit of a product equally

• Additional units of a good provide less additional satisfaction

• Utility increases at an increasing rate

• None of the above

What is consumer surplus?

• The price consumers pay for a product

• The difference between what consumers are willing to pay and what they actually pay

• The profit earned by producers

• The cost of production saved by consumers

If the price elasticity of demand is greater than 1, demand is considered:

• Inelastic

• Elastic

• Unit elastic

• Perfectly inelastic

When demand is perfectly inelastic, the demand curve is:

• Vertical

• Horizontal

• Downward sloping

• Upward sloping

The income elasticity of demand for a normal good is:

• Positive

• Negative

• Zero

• Infinite

If a good has many close substitutes, its price elasticity of demand will likely be:

• Inelastic

• Elastic

• Unit elastic

• Perfectly inelastic

The cross-price elasticity of demand measures the responsiveness of the demand for one good to changes in:

• Income

• The price of another good

• Its own price

• Total revenue

Which of the following is likely to have the highest price elasticity of demand?

• Gasoline

• Electricity

• Luxury handbags

• Water