Scribd
Upload
15 views4 pages

Microeconomics Test 1

The document contains a series of true/false, matching, and multiple-choice questions related to economic concepts such as utility, consumer preferences, and elasticity of demand. It includes answers to each question, providing a comprehensive overview of fundamental economic principles. Key topics covered include budget constraints, indifference curves, and the characteristics of different types of goods.

Uploaded by

yudaslivester
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
15 views4 pages

Microeconomics Test 1

The document contains a series of true/false, matching, and multiple-choice questions related to economic concepts such as utility, consumer preferences, and elasticity of demand. It includes answers to each question, providing a comprehensive overview of fundamental economic principles. Key topics covered include budget constraints, indifference curves, and the characteristics of different types of goods.

Uploaded by

yudaslivester
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

Test 1

True/False Questions
1. Consumer preferences are always rational and complete. (True)

2. The concept of utility is used to measure satisfaction derived from goods and services.
(True)

3. Ordinal utility assigns numerical values to preferences, whereas cardinal utility does not.
(False)

4. Goods always have a positive marginal utility. (False)

5. Indifference curves for perfect substitutes are straight lines. (True)

6. The budget constraint set represents all combinations of goods a consumer can afford.
(True)

7. Homothetic preferences imply that indifference curves shift proportionally as income


changes. (True)

8. Perfect complements exhibit L-shaped indifference curves. (True)

9. Elasticity of demand measures the responsiveness of demand to changes in price. (True)

10. Engel’s Law states that as income rises, the proportion spent on food increases. (False)

Matching Questions
Match the concepts in Column A with their definitions in Column B:

Column A
1. Perfect substitutes

2. Cobb-Douglas utility

3. Engel function

4. Inferior goods

5. Budget constraint

6. Elasticity of demand

7. Marginal rate of substitution

8. Indifference curve

9. Homothetic preferences
10. CES utility function

Column B
A. Goods that can replace each other completely.

B. A utility function with the form U(x, y) = x^a * y^(1-a).

C. A relationship showing demand as a function of income.

D. Goods for which demand decreases as income increases.

E. The set of goods a consumer can afford at given prices and income.

F. Responsiveness of demand to price changes.

G. The rate at which one good can be substituted for another while maintaining utility.

H. A curve showing combinations of goods providing equal satisfaction.

I. Preferences consistent with proportional shifts in income.

J. Utility function with constant elasticity of substitution.

Multiple Choice Questions


1. What does the budget constraint represent?
a) The utility level a consumer achieves
b) All goods and services available in the market
c) Combinations of goods a consumer can afford given income and prices
d) The satisfaction level of a consumer
Answer: c

2. What type of utility function is U(x, y) = x + y?


a) Cobb-Douglas
b) Perfect complements
c) CES
d) Perfect substitutes
Answer: d

3. What does Engel’s Law state about income and expenditure?


a) As income increases, demand for inferior goods rises.
b) As income increases, the proportion of income spent on food decreases.
c) As income increases, the demand for all goods rises.
d) As income increases, the elasticity of demand for goods falls.
Answer: b

4. Which of the following best describes perfect complements?


a) Goods that can replace each other
b) Goods consumed in fixed proportions
c) Goods with constant marginal rate of substitution
d) Goods with high price elasticity
Answer: b

5. The marginal rate of substitution (MRS) is:


a) The slope of the budget line
b) The ratio of marginal utilities of two goods
c) Always constant for all goods
d) The point where total utility is maximized
Answer: b

6. What type of elasticity measures responsiveness to changes in consumer income?


a) Price elasticity
b) Cross elasticity
c) Income elasticity
d) Demand elasticity
Answer: c

7. Inferior goods are defined as:


a) Goods that have negative income elasticity of demand
b) Goods for which price elasticity is less than one
c) Goods that have a constant marginal rate of substitution
d) Goods that are perfectly elastic
Answer: a

8. Indifference curves never:


a) Cross each other
b) Slope downward
c) Represent equal satisfaction
d) Show utility levels
Answer: a

9. The CES utility function is characterized by:


a) Linear indifference curves
b) Constant proportional substitution between goods
c) Fixed consumption ratios
d) None of the above
Answer: b

10. The Engel function describes:


a) Price elasticity
b) Demand as a function of income
c) The relationship between price and quantity demanded
d) Marginal utility of income
Answer: b
Answers for Matching Items
1. Perfect substitutes - A. Goods that can replace each other completely.

2. Cobb-Douglas utility - B. A utility function with the form U(x, y) = x^a * y^(1-a).

3. Engel function - C. A relationship showing demand as a function of income.

4. Inferior goods - D. Goods for which demand decreases as income increases.

5. Budget constraint - E. The set of goods a consumer can afford at given prices and income.

6. Elasticity of demand - F. Responsiveness of demand to price changes.

7. Marginal rate of substitution - G. The rate at which one good can be substituted for
another while maintaining utility.

8. Indifference curve - H. A curve showing combinations of goods providing equal


satisfaction.

9. Homothetic preferences - I. Preferences consistent with proportional shifts in income.

10. CES utility function - J. Utility function with constant elasticity of substitution.

You might also like