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WorksheetsPractice Topic 3
Total questions: 10
Worksheet time: 5mins
The main focus of utility theory is to:
Explain government spending
Determine how producers maximize output
Show how consumers allocate their income
Measure a country's total income
Consumers need to make choices because:
Prices of goods are the same
Time and money are unlimited
Resources are scarce but wants are unlimited
Companies force them to buy certain products
According to the law of diminishing marginal utility:
Each extra unit of consumption increases satisfaction
The more we consume, the less satisfaction we get from the next unit
Utility always increases with more consumption
Total utility decreases with each unit consumed
The law of equi-marginal utility suggests that consumers:
Spend all their money on one good
Seek maximum satisfaction by balancing utility per Ringgit
Choose only free goods
Always choose cheaper goods regardless of preference
Which is not an assumption of the indifference curve theory?
Consumers behave rationally
Income is constant
Utility is measurable
Marginal rate of substitution diminishes
A budget line shows:
All affordable combinations of two goods given a budget
Maximum production output
The most expensive product bundles
The total market income
Mei Ling eats 4 pieces of sushi and gains 80 utils in total. What is her average utility per sushi?
10
20
30
40
Johan drinks one glass of juice and gets 15 utils. The second glass increases his total utility to 26 utils. What is the marginal utility of the second glass?
10
11
12
13
Marginal rate of substitution refers to:
The rate at which a producer hires workers
The rate at which a consumer gives up one good for another while maintaining satisfaction
The extra utility from consuming an additional unit
The total amount spent on both goods
Rational behaviour in economics means:
Spending money randomly
Making choices to maximize satisfaction
Avoiding consumption
Ignoring product prices
