Consumer Behaviour

Total utility is maximum when marginal utility is ____.

• positive

• maximum

• zero

• negative

Marginal utility is best defined as ratio of________.

• total quantity consumed to total utility

• total utility to total quantity consumed

• changes in total quantity consumed to change in total utility

• ratio of changes in total utility to change in quantity consumed

The law of diminishing marginal utility implies that as a person consumes more and more of a given good _______.

• MU will decline

• TU will fall and then rise

• MU become negative

• TU will decline

This is the following characteristics of indifference curve except ________.

• it is a negative slope

• the IC on the right yields higher satisfaction

• the IC will always intersect

• the IC is convex to the origin

The higher the position of the indifference curve from its initial point means ________.

• minimum level of satisfaction

• there is no difference in the level of satisfaction

• the level of satisfaction is higher

• the level satisfaction is zero

A consumer will maximize utility by consuming on the highest possible indifference curve.

• True

• False

If the indifference curve is cross to the budget line, this will result in consumer equilibrium.

• True

• False

Increase in consumer's income will shift the budget line to the right.

• True

• False

Decrease in price of goods will usually allow a consumer to achieve a higher indifference curve.

• True

• False

Utility is most closely related to the term ________.

• useful

• useless

• necessary

• satisfaction