MCQ Bank
What does the Expenditure Function represent?
- A) Average utility per unit of expenditure
- B) Total income spent on goods
- C) Maximum utility achievable
- D) Minimal expenditures for a given utility
How is the effect of an increase in money income on the maximized utility interpreted through the Lagrange multiplier?
- A) It reduces purchasing power
- B) It indirectly affects prices
- C) It has no impact on utility
- D) It directly increases utility
Which of the following shows the inelastic demand?
- A) ℰd = 1
- B) ℰd ≠ 1
- C) ℰd > 1
- D) ℰd < 1
Which demand curve is generally less responsive to price changes for a normal good?
- A) Both Marshallian and Hicksian
- B) Depends on the price
- C) Hicksian
- D) Marshallian
In the dual minimization problem associated with utility maximization, what is the primary objective?
- A) Maximizing utility
- B) Achieving equilibrium prices
- C) Maximizing utility
- D) Allocating income efficiently
How is the Marshallian demand function related to price and quantity demanded?
- A) It illustrates the relationship between price and quantity demanded.
- B) It is unrelated to economic concepts.
- C) It shows the relationship between price and quantity supplied.
- D) It measures the impact of changes in income on quantity demanded.
What does the Weak Axiom of Revealed Preference (WARP) state regarding the choices of quantities from different budget sets?
- A) All choices are consistent
- B) It is unrelated to choice behavior
- C) No consistent choices are possible
- D) Consistency in choosing q1(X1) and q2(X2)
In the context of the Marshallian demand function derivation, what does the Price Consumption Curve (PCC) depict when the price of good X falls?
- A) A vertical straight line
- B) A rising upward curve
- C) A downward slope
- D) A backward-bending curve
Why is the expenditure-minimization approach often considered more useful?
- A) Expenditures are observable
- B) Utility is directly observable
- C) Expenditures are not relevant
- D) Utility is always maximized
What is the goal of the dual minimization problem associated with utility maximization in the context of budget minimization?
- A) Maximizing utility
- B) Setting up the Lagrangian
- C) Minimizing expenditure
- D) Allocating income efficiently
What does the Lagrange multiplier represent in the context of the indirect utility function derivation?
- A) Rate of change of utility
- B) Standard of living
- C) Marginal utility of money income
- D) Purchasing power
Which demand curve is sometimes referred to as the compensated demand curve?
- A) Hicks demand curve
- B) Ordinary demand curve
- C) Standard demand curve
- D) Slutsky demand curve
How are the Expenditure Function and the Indirect Utility Function related?
- A) They are identical functions
- B) They represent different utility levels
- C) They are unrelated concepts
- D) They are inverse functions of each other
The Hicksian demand curve reflects:
- A) Substitution and income effects
- B) Only income effects
- C) Neither substitution nor income effects
- D) Only substitution effects
Which of the following laws states an inverse relationship between the quantity demanded and the price of a commodity?
- A) Law of demand
- B) Law of production
- C) Law of increasing costs
- D) Law of supply
How does the substitution effect impact demand when prices increase?
- A) Demand decreases
- B) Demand increases
- C) Demand becomes elastic
- D) Demand remains unchanged
Which property of the indirect utility function ensures that the utility of X remains unaffected despite changes in income and price?
- A) Roy's identity
- B) Continuous function
- C) Homogeneous degree zero in (P, M)
- D) Increasing in Income
The relationship between the demand for a product and its determinants is known as:
- A) Demand function
- B) Supply function
- C) Cost function
- D) Utility function
According to the income effect if a decrease in the price of a good leads to a decrease in its consumption is known as:
- A) Normal good
- B) Veblen good
- C) Inferior good
- D) Giffen good
What does the Marshallian demand function primarily illustrate?
- A) Impact of changes in income on quantity demanded
- B) Relationship between supply and demand
- C) Relationship between price and quantity demanded
- D) Consumer surplus