Consumer Theory Quizzes: Master Consumer Choices in Economics

Question 1

Which of the following will NOT affect the position of a consumer's budget line?

Accepted Answer

Change in tastes and preferences

Answer

Change in the price of a good

Answer

Change in income

Question 2

Indifference curves depict consumer preferences. What best describes their slope and shape?

Accepted Answer

Downward sloping and convex to the origin

Answer

Upward sloping and convex to the origin

Answer

Downward sloping and linear

Question 3

What does an indifference curve illustrate in consumer theory?

Accepted Answer

All possible combinations of two goods providing equal satisfaction to a consumer.

Answer

The ideal combination of goods within a specific budget.

Answer

A consumer's decreasing willingness to exchange one good for another.

Answer

The minimum quantity of a good a consumer requires.

Question 4

Which of the following is NOT a factor that can influence a consumer's utility?

Accepted Answer

Government regulations

Answer

Income

Answer

Price of goods

Answer

Tastes and preferences

Question 5

An indifference curve represents the combinations of goods that provide a consumer with an equal level of satisfaction.

Accepted Answer

True

Answer

False

Question 6

The demand curve for a good shows the quantity of the good that consumers are willing and able to purchase at different prices.

Accepted Answer

True

Answer

False

Question 7

Elasticity measures the responsiveness of demand to changes in price, income, or other factors.

Accepted Answer

True

Answer

False

Question 8

If the price of a good increases and the quantity demanded decreases, the demand for the good is elastic.

Accepted Answer

True

Answer

False

Question 9

The marginal rate of substitution (MRS) is the ratio of the marginal utilities of two goods.

Accepted Answer

True

Answer

False

Question 10

Utility maximization occurs when the consumer chooses the combination of goods that provides the highest level of satisfaction given their budget constraint.

Accepted Answer

True

Answer

False

Question 11

The slope of a budget constraint is determined by:

Accepted Answer

Both the consumer's income and the prices of goods.

Answer

The consumer's income.

Answer

The prices of goods.

Answer

Neither the consumer's income nor the prices of goods.

Question 12

A consumer's utility function is a:

Accepted Answer

Mathematical representation of their preferences.

Answer

Graph representing their indifference curves.

Answer

List of their desired goods.

Answer

Table of their expected consumption.

Question 13

Consumer surplus is:

Accepted Answer

The benefit consumers receive from purchasing a good at a price below its willingness-to-pay.

Answer

The benefit producers receive from selling a good at a price above its cost of production.

Answer

The total amount of money spent by consumers on a particular good.

Answer

The total amount of money earned by producers of a particular good.

Question 14

What is the purpose of an indifference curve?

Accepted Answer

To show combinations of goods that provide equal satisfaction to a consumer.

Answer

To show combinations of goods that a consumer can afford.

Answer

To show combinations of goods that a consumer prefers over others.

Answer

To show combinations of goods that are available in the market.

Question 15

Define indifference curves.

Accepted Answer

Curves showing combinations of goods that provide equal satisfaction to a consumer.

Answer

Curves indicating combinations of goods that a consumer cannot afford.

Answer

Curves representing combinations of goods that a consumer prefers.

Answer

Curves illustrating combinations of goods that a consumer consumes when prices change.

Question 16

A perfectly inelastic demand curve implies that:

Accepted Answer

Quantity demanded is constant despite price changes.

Answer

Quantity demanded changes proportionately to price changes.

Answer

Quantity demanded changes more than proportionately to price changes.

Answer

Quantity demanded changes less than proportionately to price changes.

Question 17

Define consumer surplus.

Accepted Answer

Difference between price consumers are willing to pay and actual price paid.

Answer

Difference between price producers are willing to sell for and actual price received.

Answer

Total revenue earned by producers from selling a good.

Answer

Total expenditure incurred by consumers on purchasing a good.

Question 18

What is the likely consequence of a price ceiling?

Accepted Answer

Shortage of the good

Answer

Surplus of the good

Answer

No change in quantity supplied

Answer

Decrease in price of the good

Question 19

Which of the following statements best defines the law of diminishing marginal utility?

Accepted Answer

The additional satisfaction (utility) derived from consuming an extra unit of a good or service decreases as more of it is consumed.

Answer

The total satisfaction derived from a good or service decreases as more of it is consumed.

Answer

The marginal utility derived from consuming a good or service increases as more of it is consumed.

Question 20

Which of the following statements best describes the fundamental assumption of consumer theory?

Accepted Answer

Consumers are rational decision-makers who aim to maximize their satisfaction.

Answer

Consumers have complete knowledge of the market and can accurately predict future conditions.

Answer

Consumers prioritize cost over all other factors when making purchasing decisions.

Answer

Consumer theory is solely applicable to individual consumers, excluding businesses and organizations.

Question 21

Which factor does NOT influence consumer demand?

Accepted Answer

Population size in the market

Answer

Consumer preferences

Answer

Consumer income

Answer

Cost of complementary goods

Question 22

The income effect due to a price reduction typically results in:

Accepted Answer

Increased demand

Answer

Decreased demand

Answer

No change in demand

Answer

Increased supply

Question 23

An inferior good is characterized by its:

Accepted Answer

Negative income elasticity of demand

Answer

Positive income elasticity of demand

Answer

Zero income elasticity of demand

Answer

Unit income elasticity of demand

Question 24

For a consumer's optimal bundle of goods:

Accepted Answer

Marginal utility per pound spent is equal across all goods

Answer

Marginal utility per pound spent is higher for luxury goods

Answer

Marginal utility per pound spent is zero for all goods

Answer

Total utility is maximized

Question 25

Which is NOT a property of indifference curves?

Accepted Answer

Intersect both the x and y axes

Answer

Downward sloping

Answer

Convex to the origin

Answer

Represent combinations of goods with equal satisfaction levels

Question 26

The budget line represents:

Accepted Answer

All possible combinations of goods that can be purchased with a given income and set of prices.

Answer

The combination of goods that yields the maximum possible utility.

Answer

The point at which a consumer's income is equal to their expenditure.

Answer

The relationship between the prices of two goods and the quantities demanded of each.

Question 27

The income elasticity of demand measures:

Accepted Answer

The responsiveness of quantity demanded to changes in consumer income.

Answer

The responsiveness of quantity demanded to changes in the price of the good.

Answer

The responsiveness of consumer income to changes in the price of the good.

Answer

The responsiveness of price to changes in consumer income.

Question 28

The optimal consumption bundle is achieved when:

Accepted Answer

The budget line is tangent to the highest attainable indifference curve.

Answer

The quantity of goods demanded equals the quantity of goods supplied.

Answer

Marginal utility for all goods consumed is equal.

Answer

The price of all goods is equal.

Question 29

Which of the following is a characteristic of a Giffen good?

Accepted Answer

Its demand curve slopes upward.

Answer

Its income elasticity of demand is positive.

Answer

Its cross-price elasticity of demand with a substitute good is negative.

Answer

Its price elasticity of demand is less than one.

Question 30

Consumer surplus is defined as:

Accepted Answer

The difference between the price a consumer is willing to pay for a good and the price they actually pay.

Answer

The difference between the price a producer is willing to accept for a good and the price they actually receive.

Answer

The total amount of income a consumer spends on a good.

Answer

The difference between the total revenue and total cost of producing a good.

Question 31

Which of the following is NOT a limitation of consumer theory?

Accepted Answer

It fully accounts for the social and environmental impacts of consumption.

Answer

It assumes consumers have perfect information about all available goods and prices.

Answer

It ignores the influence of marketing and advertising on consumer choices.

Answer

It is applicable to markets with multiple sellers.

Question 32

The concept of revealed preference suggests that:

Accepted Answer

Consumers' true preferences can be inferred from their observed purchases.

Answer

Consumers always choose the consumption bundle that maximizes their satisfaction.

Answer

Preferences are always consistent and never change.

Answer

Consumer demand is always logical and rational.

Question 33

Indifference curves illustrate a consumer's preferences for combinations of goods that provide:

Accepted Answer

Equal levels of satisfaction

Answer

Maximum utility

Answer

Minimum cost

Answer

Highest price

Question 34

The elasticity of demand measures the:

Accepted Answer

Responsiveness of quantity demanded to changes in price.

Answer

Responsiveness of quantity demanded to changes in income.

Answer

Responsiveness of quantity demanded to changes in consumer preferences.

Answer

Responsiveness of price to changes in quantity demanded.

Question 35

An inferior good is characterized by:

Accepted Answer

Negative income elasticity of demand.

Answer

Positive income elasticity of demand.

Answer

Zero income elasticity of demand.

Answer

Unit elastic income elasticity of demand.

Question 36

The utility function of a risk-averse expected utility maximizer is typically:

Accepted Answer

Concave.

Answer

Convex.

Answer

Linear.

Answer

Quadratic.

Question 37

The compensated demand function illustrates:

Accepted Answer

The optimal quantity demanded of a good at different price levels, holding income constant.

Answer

The optimal quantity demanded of a good at different income levels, holding prices constant.

Answer

The optimal combination of goods demanded at different price levels, holding income constant.

Answer

The optimal quantity demanded of a good at different income and price levels.

Question 38

An indifference curve represents combinations of goods that:

Accepted Answer

Provide an equal level of satisfaction to a consumer

Answer

Will deliver the maximum benefit

Answer

Are always practically possible to obtain

Answer

Are permanently preferred to other combinations

Question 39

The slope of an indifference curve illustrates:

Accepted Answer

The consumer's marginal rate of substitution

Answer

The market price ratio between the two goods

Answer

The consumer's total utility

Answer

The budget constraint

Question 40

The budget constraint represents:

Accepted Answer

The set of all combinations of goods that the consumer can afford given their income and prices

Answer

The consumer's total expenditure

Answer

The consumer's desired level of consumption

Question 41

The optimal consumption bundle occurs at the point where:

Accepted Answer

The indifference curve is tangent to the budget constraint

Answer

The consumer is spending all of their income

Answer

The consumer is maximizing their total utility

Question 42

The income elasticity of demand measures:

Accepted Answer

The responsiveness of consumer demand to changes in income

Answer

The responsiveness of consumer demand to changes in the price of substitute goods

Answer

The responsiveness of consumer demand to changes in price

Answer

The responsiveness of consumer demand to changes in tastes and preferences

Question 43

Which of the following goods is typically characterized by a high price elasticity of demand?

Accepted Answer

Luxury goods

Answer

Inferior goods

Answer

Necessities

Answer

Durable goods