Law of Diminishing Marginal Utility

Law of Diminishing Marginal Utility

 

1. What is the Law of Diminishing Marginal Utility?

A. Consumers can buy unlimited goods and services given their income.

B. The more you consume of a good, the less satisfaction you derive from each additional unit consumed.

C. Consumers derive maximum satisfaction from the first unit of a good consumed.

D. Consumers face no limitations in their purchasing decisions.

2. What can the theory of consumer behavior help consumers with?

A. To make irrational choices

B. To make better spending decisions

C. To spend money randomly

D. To avoid budget constraints

3. How can businesses utilize the theory of consumer behavior?

A. To decrease product quality

B. To develop effective marketing strategies

C. To ignore consumer preferences

D. To increase prices randomly

4. What is a key limitation of the theory of consumer behavior?

A. Consumers always behave rationally

B. Consumers' decisions can be irrational

C. Consumers are not influenced by external factors

D. Consumers' choices are not impacted by emotions

5. In what way can the theory of consumer behavior be beneficial to governments?

A. To increase taxes on consumers

B. To manipulate consumer decisions

C. To design economic policies

D. To restrict consumer spending

6. What is the primary purpose of the theory of consumer behavior?

A. To limit consumer choices

B. To help businesses develop marketing strategies

C. To confuse consumers

D. To increase government control over spending

7. Where does consumer equilibrium occur?

A. At the point of maximum income for a consumer.

B. When a consumer buys all available goods in the market.

C. When a consumer's budget line intersects their highest indifference curve.

D. At the intersection of the budget line and the budget constraint.

8. What does a budget line show in consumer theory?

A. The maximum amount of goods a consumer can buy regardless of income.

B. Possible combinations of goods a consumer can afford given income and prices.

C. The relationship between income and consumer preferences.

D. The optimal combination of goods for a consumer.

9. What is an indifference curve in economics?

A. A curve showing the preference for one good over another.

B. A graphical representation of combinations of goods a consumer is indifferent between.

C. A curve indicating the diminishing satisfaction from consuming more goods.

D. A representation of the budget line.

10. What does a budget constraint represent for a consumer?

A. The limitation due to their limited income on what they can afford to buy.

B. The ability to buy any amount of goods regardless of income.

C. Unlimited income allowing for unlimited purchases.

D. No relation between income and purchasing decisions.

11. What is utility in the theory of behavior?

A. A measure of satisfaction derived from consuming goods and services

B. The total amount of money a consumer spends on goods and services

C. The number of goods and services available in the market

D. The cost of producing goods and services

12. How does the theory of consumer behavior view the allocation of scarce resources?

A. As a random process

B. As a collective decision by society

C. As choices made by individual consumers

D. As a government-controlled action

13. What role does rationality play in the theory of consumer behavior?

A. Consumers make irrational decisions to challenge the market

B. Consumers are assumed to make decisions that maximize their utility

C. Consumers follow trends without considering utility

D. Consumers prioritize quantity over satisfaction

14. Which concept explains that the satisfaction from consuming more of a good diminishes over time?

A. Law of Increasing Marginal Utility

B. Law of Diminishing Marginal Utility

C. Law of Constant Marginal Utility

D. Law of Variable Marginal Utility

15. What is the key factor that consumers aim to maximize in the theory of consumer behavior?

A. Utility

B. Income

C. Savings

D. Debt

16. What is the main focus of the theory of consumer behavior in microeconomics?

A. How individual consumers make choices about allocating resources

B. How governments regulate consumer behavior

C. How firms set prices in the market

D. How to maximize production efficiency

17. Why is utility considered subjective in consumer behavior theory?

A. Different individuals find different things useful

B. It is based on objective criteria

C. It is the same for everyone

D. It depends on the price of goods

18. In the theory of consumer behavior, what is assumed about consumers?

A. They always maximize costs

B. They make random decisions

C. They are rational actors

D. They have unlimited resources

19. What does the Law of Diminishing Marginal Utility state?

A. Consumers always experience constant satisfaction levels

B. The additional satisfaction decreases as more of a good is consumed

C. The additional satisfaction increases as more of a good is consumed

D. Consumers get unlimited satisfaction from consuming goods

20. How is utility described in the theory of consumer behavior?

A. Subjective measure of satisfaction

B. Fixed measure of satisfaction

C. Objective measure of satisfaction

D. External measure of satisfaction

1. B 2. B 3. B 4. B 5. C 6. B 7. C 8. B 9. B 10. A 11. A 12. C 13. B 14. B 15. A 16. A 17. A 18. C 19. B 20. A