Micro Economics 100 MCQs

1) Worth a rupee to a consumer is called: 

(a) Marginal utility of money ✔
(b) total utility of money 
(c) diminishing marginal 

utility of money 
(d) consumer’s equilibrium 

2) A consumer attains equilibrium, in case of one commodity, when: 

(a) MUx= Px ✔
(b) MUx>Px 
(c) MUx < Px 
(d) MUx = 0 

3) Consumer equilibrium in case of two commodities(say X and Y) is struck when:

(a) MUx/Px= MUm (b)MUx/Px>MUy/Py 
(c) MUx/px = MUy/py = MUm✔

(d)MUx/Px

4) A consumer reaches the point of equilibrium when; 

(a) MRSxy>Px/Py 
(b)MRSxy < Px/Py 
(c) MRSxy=Px/Py ✔
(d) none of these

5) A consumer will start buying less of good-X and more of Good-Y, when: 

(a) MUx/Px = MUm 
(b)MUx/Px < MUy/Py ✔
(c)MUy/Py = MUm 

(d)MUx/Px>MUy/Py 

6) According to IC approach, at the point of equilibrium: 

(a)slope of IC > slope of price line (b)slope of IC < slope of price line 

(c)slope of IC # slope of price line (d)slope of IC=slope of price line✔

7) Additional utility derived from the consumption of an additional unit of a commodity is called: 

(a) Average utility 
(b) total utility 
(c) Marginal utility ✔
(d) none of these 

8) The slope indifference curve is equal to: 

(a) One 
(b)marginal rate of substitution ✔
(c) Marginal utility 
(d) none of these

9) Why is indifference curve convex to origin? 

(a)Due to law of diminishing marginal utility 
(b) Due to monotonic preferences

(c) Due to continuous decline of marginal rate of substitution ✔
(d) Both a and b 

10)It is the property of indiffe-rence curve that no two IC can intersect each other. The 

reason behind this is: 

(a) Consumer preferences are monotonic 
(b) Preferences are complete 

(c) Same combination of two goods cannot give different level of satisfaction ✔

(d) Diminishing marginal rate of substitution 

11) Slope of budget line is: 

(a)Px/Py ✔
(b)Py/Px 
(c) MRS 
(d)Px.Py

12) Which of the following is not the property of indifference curve: 

(a)Higher the indifference curves higher the level of satisfaction 

(b)Two indifference curves cannot intersect each other 

(c) Indifference curve is concave to origin✔

(d)Indifference curve is downward sloping

13) An Indifference curve slope down towards right since more of one commodity and 

less of another result in:

(a) Same satisfaction ✔
(b) Greater satisfaction 
(c) Maximum satisfaction 

(d)Decreasing expenditure 

14) Hicks and Allen believed that utility: 

(a) Cannot be measured 
(b) Cannot be expressed 
(c) Can be measured in cardinal 

numbers 
(d) Can be measured in ordinal numbers✔

15) An indifference curve is related to: 

(a)Consumer’s income 
(b) prices of goods X and Y 

(c) Total utility from goods X and Y 
(d) choices and preferences of consumer✔

16) As we move down the indifference curve left to right, the slope of indifference curve 

tends to: 

(a) Unity 
(b) rise 
(c) Zero 
(d) declines✔

17) A shift in budget line, when prices are constant, is due to: 

(a) change in demand 
(b) change in income✔

(c) change in preferences 
(d) change in utility

18) Marginal rate of substitution of X for Y is calculated as: 

(a)Px/Py 
(b)Py/Px 
(c) Change in Y / change in X✔
(d) change in X/ change in Y 

19) A set of ICs drawn in a graph is called: 

(a) Indifference curve 
(b) indifference map✔

(c)budget line 
(d) all of these 

20) In indifference map, higher IC indicates:

(a) Lower level of satisfaction 
(b) same level of satisfaction 

(c)Higher level of satisfaction ✔
(d) either higher or same level of satisfaction 

21) MRS is determined by: 

(a) satisfaction level of the consumer 
(b) income of the consumer 

(c) taste of the consumer 
(d) preferences the consumer✔

22) In a situation when MRS>Px/Py, the consumer would react by: 

(a) Diminishing the consumption of commodity-x 

(b)Increasing the consumption of commodity-y 

(c) Increasing the consumption of commodity-x✔

(d) None of these 

23) Two indifference curves cannot cut each other because: 

(a) They slope downwards. 

(b) They are convex to origin 

(c) They represent those combinations of two goods that give the same satisfaction 

(d) Each indifference curve represents a different level of satisfaction✔

24) Specific quantity to be purchased against a specific price of the commodity is called: 

(a) Demand 
(b) quantity demand ✔
(c) Movement along demand curve 
(d) shift in demand 

25) The graphic presentation of a table showing price and relationship[ for a commodity 

in the market is called:

(a)Individual demand curve 
(b) producer’s demand curve 

(c) Market demand curve ✔
(d) consumer’s demand curve

26) Downward slope of the demand curve shows: 

(a) Positive relationship between price and quantity demanded 

(b) Inverse relationship between price and quantity demanded✔

(c) No relationship between price and quantity demanded 

(d) None of these 

27) How two goods (apple and orange) are related when, as a result of rise in the price of 

apples, demand for oranges increases? 

(a) Substitute goods ✔
(b) complementary goods 

(c) normal goods 
(d) inferior goods 

28) In case of normal goods, demand curve shows: 

(a) a negative slope ✔
(b) a positive slope 
(c) zero slope 
(d) none of these 

29) Law of demand must fail in case of: 

(a) normal good s 
(b) giffen goods ✔
(c) inferior goods 
(d)none of these 

30) Inferior goods are those whose income effect is: 

(a) negative ✔
(b) positive 
(c)zero 
(d) none of these 

31) Which of the following pairs represents substitute goods? 

(a) car and petrol 
(b) juice and cold drink ✔
(c) bread and butter 
(d) all of these 

32) In case of Giffen’s paradox, the slope of demand curve is: 

(a) negative 
(b) positive ✔
(c) parallel to X-axis 
(d) parallel to Y-axis 

33) As a result of rise in consumer’s income, demand curve for coarse grain(inferior 

good): 

(a) becomes a horizontal straight line 
(b) becomes a vertical straight line 

(c) shifts to the right 
(d) shifts to the left✔

34) If two goods are complementary then rise in the price of one results in: 

(a) rise in demand for the other (b) fall in demand for the other✔

(c) rise in demand for both 
(d) none of these 

35) Demand curve is upward sloping for: 

(a) normal goods 
( b) inferior goods 
(c) giffen goods ✔
(d) none of these

36) Movement along the demand curve occurs due to change in:

(a) own price of the commodity ✔
(b) determinants of demand, other than own price of the commodity 

(c) both (a) and (b) 
(d) none of these 

37) An increase in the price of electricity will cause the demand for electric appliances to: 

(a) rise 
(b) fall ✔
(c) remain the same 
(d) none of these 

38) Shift in demand curve means: 

(a) Fall in demand due to rise in own price of the 

(b) Rise in demand due to fall in own price of the 

(c) Change in demand due to factors other than own price of the commodity✔

(d) None of these

39) A fall in income of the consumer (in case of normal goods) will cause: 

(a) Upward movement on the demand curve 

(b) Downward movement on the demand curve 

(c) Rightward shift of the demand curve

(d) Leftward shift of the demand curve✔

40) Change in quantity demanded of a commodity due to change in its own price, other  things remaining constant, is called: 

(a) cross price effect 
(b) price effect ✔
(c) income effect 
(d) substitution effect 

41) In case of contraction of demand, we move: 

(a) From lower point to upper point on the same demand curve✔
 (b) To right on the another demand curve 

(c) From upper point to lower point on the same demand curve 

(d) To left on the another demand curve 

42) Increase in demand occurs due to: 

(a) Decrease in price of the complementary good 
(b) Increase in income of the 

consumer 
(c) Increase in price of the substitutes 
(d) all of these✔

(43) Assumptions of the law of demand refer to: 

(a) constant own price of the commodity 
(b) Constant determinants of demand other than own price of the commodity ✔

(c) constant cost of production (d) none of these 

44) Law of demand is violated when: 

(a) income effect is negative 
(b) substitution effect is negative (c) negative income effect is greater than substitution effect ✔
(d) negative income effect is 

less than substitution effect 

45) A fall in own price of the commodity leads to:

(a) increase In real income of the consumer 
(b) decrease in real income of the 

consumer 
(c) increase in purchasing power of the consumer 
(d) both (a) and (c)✔

46) Substitution effect takes place when price of the commodity becomes: 

(a) relatively cheaper 
(b) relatively dearer 
(c) stable 
(d) both (a) and (b)✔

47) Different quantities purchased at different possible prices of a commodity is called: 

(a) demand schedule ✔
(b) quantity demanded 

(c) demand function 
(d) individual demand 

48) Diagrammatic presentation of demand schedule of an individual buyer of a 

commodity in the market yields: 

(a) market demand schedule 
(b) individual demand curve✔
(c) individual demand schedule 
(d) market demand curve 

49) Goods are demanded because these possess: 

(a) utility ✔
(b) capacity 
(c) needs 
(d) none of these 

50) Complementary goods: 

(a) complete the demand for each other 
(b) are substituted for each other 

(c) are demanded together 
(d) both (a) and (c)✔

51) In case of normal goods, the relationship between income and quantity demanded is: 

(a) negative 
(b) positive ✔
(c) zero 
(d) infinite 

52) In case of normal goods, the relationship between own price of the commodity and its 

quantity demanded is: 

(a) constant 
(b) inverse ✔
(c) positive 
(d) none of these 

53) An exception to the law of demand is: 

(a) normal good 
(b) Giffen good 

(c) article of distinction 
(d) both (b) and (c)✔

54) Distribution of income is a determinant of: 

(a) individual demand function (b) market demand function ✔
(c) both (a) and (c) 
(d) none of these 

55) In case of giffen goods, demand curve is: 

(a) upward sloping ✔
(b) downward sloping 

(c) parallel to X-axis 
(d) parallel to Y-axis 

56) When increase in the price of one good causes an increase in demand for the other, the goods are: 

(a) substitutes ✔
(b) complementary 
(c) inferior 
(d) giffen 

57) In case of inferior goods: 

(a) income effect is negative ✔
(b) income effect of positive 

(b) (c) income effect is zero 
(d) none of these 

58) Shift in demand curve occurs when demand for a commodity changes due to change in:

(a) own price of commodity 
(b) determination of demand, other than own price of the commodity ✔
(c) both (a) and (c) 
(d) none of these 

59) Change in quantity demanded of a commodity due to change in real income of the consumer caused by change in own price of the commodity is called:

(a) cross price effect 
(b) price effect 

(c) income effect ✔
(d) substitution effect

60) When income of the consumer rises in case of a normal good: 

(a) demand curve shifts to the left 
(b) demand curve shifts to the right✔

(c) there is upward movement along the demand curve 
(d) there is downward 

movement along the demand curve 

61) An increase in the price of computer will cause the demand for internet services to: 

(a) rise 
(b) remain the same 
(c) fall ✔
(d) none of these

62) The concept of utility was introduced by 

(a) Marshall 
(b) Hicks and allen 
(c) Geremy Bentham ✔
(d) Gossen 

63) Cardinal utility analysis to consumer equilibrium was developed by 

(a) Marshall ✔
(b) Hicks and Allen 
(c) Geremy Bentham 
(d) Gossen 

64) Ordinal utility analysis is otherwise known as 

(a) Gossens second law 
(b) Cardinality approach

(c) Indifference curve analysis✔
(d) Rationality approach 

65) Ordinal utility analysis Was developed by

(a) J.R.Hicks & R.J. R.J.D. Allen✔
(b) Samualson 

(c) Marshall and Jevons 
(d) Slutsky 

66) Total utility curve 

(a) Always rises 
(b) First falls then rises 

(c) Always falls 
(d) First rises and then falls after reaching its maximum✔

67) Total utility is maximum when 

(a) Marginal utility is zero ✔
(b) Marginal utility is maximum 

(c) Marginal utility increases 
(d) Average utility is maximum 

68) Marginal utility is 

(a) Always zero 
(b) Increases at a diminishing rate 

(c) The utility derived from last unit ✔
(d) All the above 

69) Total utility is 

(a) The sum total of marginal utilities 
(b) Entire utility derived from whole consumption 

(c) Increases at a diminishing rate 
(d) All the above✔

70) When Total utility is increasing at an decreasing rate, marginal utility is

(a) Constant 
(b) Negative 
(c) Increasing 
(d) Decreasing ✔

71) Which of the following is called gossans first law

(a) Law of substitution 
(b) Law of equi marginal utility 

(c) Law of diminishing marginal utility ✔
(d) None of the above 

72) At saturation point MU of a commodity is 

(a) Positive 
(b) Negative 
(c) Zero ✔
(d) Increasing 

73) A consumer reaches equilibrium when

(a) Marginal utility is equal to price ✔
(b) Marginal utility greater than price 

(c) Marginal utility less than price 
(d) Total utility is equal to price

74) Marshalian cardinal utility analysis assumes 

(a) Marginal utility of money is zero 
(b) Marginal utility of money is decreasing 

(c) Marginal utility of money is increasing 
(d) Marginal utility of money is constant✔

75) When individuals income rises (everything remain the same) his demand for a normal 

good 

(a) Rises ✔
(b) Falls 
(c) Remains the same                  
(d) negative 

76) When individuals income falls (everything remain the same) his demand for a normal 

good 

(a) Rises 
(b) Falls ✔
(c) Remains the same 
(d) negative 

77) When individuals income falls (everything remain the same) his demand for an 

inferior good 

(a) Rises 
(b) Falls✔

(c) Remains the same 
(d) We cannot say without additional information 

78) Other things being equal a decrease in demand can be caused by 

(a) A fall in price of the commodity 
(b) A fall in income of the consumer✔

(c) A rise in price of the substitute 
(d) None of these 

79) When price of a product falls, more of it is purchased because of 

(a) The substitution effect 
(b) The income effect 

(c) Neither substitution effect nor income effect 
(d) Both the substitution and income effects✔

80) “Utility or satisfaction is a subjective concept; therefore it could only be ranked”. The 

statement supports 

(a) Cardinal utility theorist 
(b) Ordinal utility theorist✔

(c) Behavioral theorist of the firm 
(d) None of the above 

81) The basic doctrine of consumers surplus is based on 

(a) Indifference curve analysis (b) Revealed preference theory 

(c) Law of substitution 
(d) Law of diminishing marginal utility ✔

82) According to Marshall, The law of diminishing marginal utility 

(a) Applies on money in the manner in which it applies on commodity

(b) Do not applies on money except bank money 

(c) Does not applies on bank money but applies on cash 

(d) Applies on all commodities except money ✔

83) An indifference curve represent 

(a) Four commodities 
(b) Less than two commodities 

(c) Only two commodities ✔
(d) Only one commodity 

84) Indifference curve is always

(a) Concave to the origin 
(b) Convex to the oringin✔

(c) L shaped 
(d) A straight line 

85) Engel curve for giffen good is

(a) Positively sloped 
(b) Negatively sloped✔

(c) Horizontal straight line 
(d) Vertical straight line 

86) Price effect is : 
(a)Income effect – substitution effect (b)Substitution effect – income effect 

(c)Income effect+substitution effect ✔
(d) Income effect + substitution effect-negative effects

87) For a giffen good, when price falls 

(a) Demand increases at a faster rate 
(b) Demand decreases

(c) Demand remains constant 
(d) Demand curve has a negative slope ✔

88) Inferior goods are the goods with 

(a) Falling Income effect 
(b) Rising Income effect 

(c) Negative income effect ✔
(d) Positive Marshallian effects 

89) Indifference curves are 

(a) Always parallel 
(b) May be parallel

(c) May not be parallel 
(d) Both b and c✔

90) Revealed preference theory assumes

(a) Weak ordering 
(b) Strong ordering✔

(c) Constant ordering 
(d) Multiple ordering 

91) Hicks Allen indifference theory is based on

(a) Weak ordering ✔
(b) Strong ordering 

(b) (c) Constant ordering 
(d) Multiple ordering 

92) Income consumption curve of an inferior commodity is 

(a) Positively sloped 
(b) Backward bending✔

(c) Downward slopping straight line 
(d) Showing constant income effect

93) In case of a convex indifference curve

(a) MRS xy is constant 
(b) MRS xy is increasing 

(c) MRS xy is negligible 
(d) MRS xy is diminishing✔

94) ‘Higher the indifference curve higher will be level of satisfaction’. The statement is 

(a) Always true ✔
(b) Always false 

(c) Sometimes true and sometimes false 
(d) True only if price effect is positive 

95) As per indifference curve analysis, consumer always try to reach

(a) Higher indifference curve ✔
(b) Lower indifference curve 

(c) Middle indifference curve 
(d) Lower income price line 

96) As per indifference curve analysis consumer equilibrium is attained when

(a) Slope of indifference curve is constant  
(b) Slopes of both indifference curve and income price line are equal ✔

(c) Slopes of both indifference curve and income price line are opposite 

(d) Both income price line and indifference curve are parallel. 

97) The slope of a budget line is 

(a) The satisfaction level of both the commodities 

(b) The income level of the consumer 

(c) The price ratio of both the commodities under considerat-ion ✔

(d) Price level of a country

98) At the point of tangency the slope of indifference curve is

(a) Differ from point to point 
(b) Is equal on the other side of the mid point 

(c) Is the same ✔
(d) Is increasing

99) The slope of a budget line throughout its length is 

(a) The satisfaction level of both the commodities 
(b) The income level of the 

consumer 
(c) The price ratio of both the commodities under conside-ration✔

(d) Price level of a country 

100) The income effect for a commodity is 

(a) Is always positive 
(b) Is always negative 

(c) Depends upon price effect 
(d) Determines the nature of the commodity✔