ECO chp.2.2

What does the law of diminishing marginal utility explain in terms of the paradox of values?

• Why water is expensive despite being essential.

• Why diamonds are cheaper than food.

• Why water is cheap despite its high use and diamonds are expensive despite low use.

• Why luxury goods are always more expensive.

Why is cardinal measurement considered a criticism of the law of diminishing marginal utility?

• • Utility can be measured in numbers like money.

• Utility is a subjective feeling, making it hard to measure.

• • Utility is constant for all goods.

• Utility can be added easily across different goods.

In the case of a miser, how does marginal utility behave?

• The miser feels less satisfaction with each additional rupee.

• • The miser feels the same satisfaction regardless of how much money is saved.

• The miser feels more satisfaction with each additional rupee saved.

• The miser feels neutral about saving money.

What happens when the marginal utility (MU) curve intercepts the X-axis?

• The total utility starts decreasing.

• Marginal utility becomes zero.

• The consumer reaches maximum satisfaction.

• The utility of the commodity becomes negative.

What does the "Constancy" assumption refer to?

• The price of the good stays the same

• Your income, mood, tastes, and utility of money don’t change during consumption

• Only one item is consumed

• All goods are consumed at once

At the very first unit of consumption, what is the relationship between Total Utility (TU) and Marginal Utility (MU)?

• TU is zero, MU is positive

• • TU and MU are equal

• TU is more than MU

• MU is zero

What happens if a consumer keeps consuming after reaching the point of satiety?

• TU increases, MU increases

• TU and MU both remain constant

• TU and MU both become zero

• TU decreases, MU becomes negative

Which is an example of "Divisibility"?

• Eating a whole watermelon in one bite

• Drinking from an unopened water bottle

• Cutting and eating a cake in slices

• Buying a single item at a time

What does the downward slope of the MU curve represent in the diagram?

• Marginal utility decreases with more consumption.

• • Marginal utility increases with more consumption.

• Marginal utility remains constant with more consumption.

• The commodity reaches its highest utility.

How does the marginal utility of money differ for a poor person compared to a rich person?

• A poor person finds less value in money than a rich person.

• A poor person finds more value in money because it satisfies more needs.

• Money has the same value for both poor and rich people.

• Money has the same value for both poor and rich people.