Free Consumer Behaviour 03 Practice Test - 11th Grade - Commerce 

Question 1

The limits imposed on household choices by income, wealth, and product prices are captured by the 

A. budget constraint
B. choice set.
C. assumption of perfect knowledge.
D. preference set.

SOLUTION

Solution : A

Budget constraint captures the limits imposed on household choices by income, wealth, and product prices.

Question 2

If production possibility frontier is linear it implies

A. Constant opportunity cost
B. Economy is stagnant
C. Underemployment of factor of production
D. With the increase in production, opportunity cost also increases

SOLUTION

Solution : A

If the shape of the PPF curve is a straight-line, the opportunity cost is constant as production of different goods is changing.

Question 3

Which of the following is not concerned with the problem of choice

A. Alternative uses of resources
B. Excessive income
C. Unlimited wants
D. Limited (scarce) resources

SOLUTION

Solution : B

The problem of choice is concerned with how limited resources are rationally allocated to alternative uses when consumers and producers have unlimited wants.

Question 4

The economizing problem involves the allocation of resources among competing wants. There is an economizing problem because there are:

A.

unlimited wants

B.

limited resources

C.

both A and B

D.

neither A nor B

SOLUTION

Solution : C

Both A and B. Economic problem is the problem of choice. It arises because resources are scarce and have alternative uses.

Question 5

Concavity of PPC implies:

A. increasing slope
B. decreasing slope
C. constant slope
D. none of these

SOLUTION

Solution : A

Concavity of PPC always implies increasing slope.

Question 6

Diagrammatic presentation of consumer's indifference set is called

A. indifference curve
B. utility curve
C. budget line
D. transformation curve

SOLUTION

Solution : A

An indifference curve is a locus of all such points, which show different combinations offering the same level of satisfaction to the consumer. It is always related to the choice and preference of the consumer.

Question 7

When onion price hits hard, the poor man simply stops buying it. Which one of these is the correct explanation for this?

A. A rupee spent on buying onions does not yield rupee worth of satisfaction
B. Price increases without any increase in the income of the consumer
C. The consumer has already reached equilibrium and is not willing to purchase additional onions
D. The consumer shifts his priorities to more urgent needs

SOLUTION

Solution : A

A consumer buys a commodity only when a rupee spent on it yields rupee worth of satisfaction (MUM). A poor man stops the consumption of onion when he finds that a rupee spent on it does not yield rupee worth of satisfaction (no matter what quantity of onions is purchases), so that, Mux/PX<MuM.

Question 8

The shape of transformation curve is changed by

A. opportunity cost
B. total cost
C. marginal opportunity cost
D. none of these

SOLUTION

Solution : C

The shape of transformation curve is changed by marginal opportunity cost.

Question 9

Marginal Utility Curve is downward sloping. State True or False.

A. True
B. False

SOLUTION

Solution : A

Marginal utility Curve is always downward sloping.

Question 10

Suppose your friend is indifferent to the bundles (4,6) and (6,6). Are the preferences of your friend monotonic?

A. Yes. He has reached his maximum level of satisfaction for Good-2 at (4,6).
B. No. He has not reached his maximum level of satisfaction for Good-1 yet.
C. Yes. He has reached his maximum level of satisfaction for both Good-1 and Good-2.
D. No. He has not reached his maximum level of satisfaction for either good.

SOLUTION

Solution : B

If a consumer has monotonic preferences, he would prefer the bundle (6,6) to the bundle (4,6), because the bundle (6,6) has more of Good-1 as compared to the bundle (4,6)
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