Tag: utility and law of diminishing marginal utility

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Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

A production possibility frontier explains ________ of Economics.

  1. law of diminishing marginal returns

  2. law of variable proportions

  3. law of marginal utility

  4. water vs. diamond paradox
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Production possibility frontier explain the law of diminishing marginal returns as with the consumption of every additional unit of one good ,the consumer is willing to sacrifice much less and less ,in two-commodity case.That is why the production possibility curve is concave to the origin.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

The concept of marginal utility plays a central role in ________.

  1. supply analysis

  2. stock analysis

  3. demand analysis

  4. security analysis
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Marginal utility refers to the utility derived from the consumption of an additional unit of a commodity. It is of utmost importance in demand analysis of the consumers. The utility refers to the power of satisfying consumer's wants.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

________ says that the additional benefit which a person derives from a given increase in his stock of a thing diminishes with every increase in the stock that he already has.

  1. Marshall

  2. Robbins

  3. Keynes

  4. Smith
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Alfred Marshall propounded the law of diminishing marginal utility..He stated that as the consumption increases the marginal utility derived from the each successive units tends to decline. The consumer is less willing to sacrifice one good to consume one more additional unit of another good at a higher level of consumption.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Which of the following is an exception to the law of diminishing marginal utility?

  1. Reading

  2. Miser

  3. Hobbies

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Law of marginal does not hold true in case of readers, misers and hobbies as the consumption increases the marginal utility derived from the each successive units tends to rise. For example, if a person's hobby is to collect stamps, then the marginal utility derived by collecting one more unit of stamp will rise.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Which of the following assumption is applicable for the law of diminishing marginal utility?

  1. The consumer is rational human being and he aims at minimization of satisfaction.

  2. The units of consumption are of reasonable size.

  3. All the units of the given commodity are heterogeneous.

  4. There is long time interval between the consumption of the goods.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

To uphold the law of marginal utility, the reasonable sized units are to be consumed. The law of marginal utility states that as consumption increases, the marginal utility derived from each successive units tends to decline.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

The law of diminishing marginal utility states that as the stock of a commodity with the consumer ____, its marginal utility to the consumer _____.

  1. decreases; decreases

  2. increases; decreases

  3. decreases; remains unchanged

  4. increases; increases
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The law of diminishing marginal utility states that as the consumption increases the marginal utility derived from the each successive units tends to decline. The consumer is less willing to sacrifice one good to consume one more additional unit of another good at a higher level of consumption.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

The law of diminishing marginal utility states that as the stock of a commodity increases with the consumer, its ________ to the consumer decreases.

  1. utility

  2. supply

  3. marginal utility

  4. average utility
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The law of diminishing marginal utility states that as the consumption increases the marginal utility derived from the each successive units tends to decline. The consumer is less willing to sacrifice one good to consume one more additional unit of another good at a higher level of consumption.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

_______ states that as the stock of a commodity increases with the consumer, its marginal utility to the consumer decreases.

  1. The law of demand

  2. The law of diminishing marginal rate of substitution

  3. The law of diminishing marginal utility

  4. The law of equi-marginal utility
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The law of diminishing marginal utility states that as the consumption increases the marginal utility derived from the each successive units tends to decline. The consumer is less willing to sacrifice one good to consume one more additional unit of another good at a higher level of consumption.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

Which of the following assumptions is applicable under the Marshallian approach of consumer behaviour?

  1. Law of diminishing utility (DMU) holds true.

  2. Marginal utility of money keeps changing.

  3. Utility is ordinally measurable.

  4. All of the above.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Law of Diminishing Marginal Utility was given by Alfred Marshall. According to the theory, the marginal utility of a consumer goes on falling as he/she consumes more and more of  a product.

Marginal utility is the additional satisfaction a consumer gains from consuming one more unit of a good or service.

The assumptions of this Marshallian approach of consumer behaviour are:

1. Marginal utility of money is constant.

2. Utility is cardinally measurable which means that the utility or satisfaction of a consumer can be measured in terms of cardinal numbers.

3. The consumer is a rational human being.

Multiple choice business economics and quantitative methods consumer's behaviour consumer equilibrium laws in economics utility and law of diminishing marginal utility

"Utility is a subjective concept therefore it could only be ranked" defines the position of  _______.

  1. cardinal utility theorists

  2. ordinal utility theorists

  3. behavioral theorists

  4. all id the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the concept of ordinal utility approach, it is impossible to measure utility in absolute terms and thus it cannot be compared. The reason for it being that it is a psychological phenomena. However, according to the ordinal utility theorists, a consumer can rank various combinations of goods and services according to his preference.