KINDLY REFER TO CHAPTER 2 A, B & C OF THE COMPREHENSIVE VIDEO LECTURES AND READ THE TOPICS BELOW BEFORE YOU ATTEMPT THE QUESTIONS THAT FOLLOW. CIS ECONS LEVEL 2 WEEK 2 TOPIC: THEORY OF UTILITY. Definition. Types. Basic concepts of Utility. Approaches to the study of Utility. Law of Diminishing marginal utility. Consumer equilibrium REVIEW QUESTIONS STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 1
1. The total satisfaction derived from the consumption of a given commodity is called. A. Production B. Consumption C. Utility D. Price 2.. Refers to the change in the form or structure of a commodity during its manufacturing process in order to increase its utility A. Place utility B. Time utility C. Form utility D. Total utility 3. is the additional satisfaction derived by consuming an extra unit of commodity. A. Total utility B. Average utility C. Marginal utility 4. The relationship between Total utility, Average utility and Marginal utility can be demonstrated graphically and algebraically. A. True B. False C. Ambiguous D. Undecided STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 2
5. The law of states that the satisfaction derived from consuming successive units of a commodity will diminish as the total consumption of the commodity increases. A. Total utility B. diminishing marginal utility C. Average utility 6. The 2 major approaches underlining the theory of consumer behavior are A. Cardinal and monetarist B. Cardinal and keynessian C. Monetarist and keynessian D. Cardinal and ordinal 7. The theory of consumer behavior that assumes that utility cannot be measured but can only be ranked based on the preferences of the consumer is A. Cardinalist B. Ordinalist C. Monetarist D. Keynessian 8. The major difference that exists between cardinalist and ordinalist is the measurability assumption STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 3
A. True B. False C. Ambiguous D. Undecided 9... refers to the difference between the amount a consumer budgeted to pay for a particular commodity based on the expected level of satisfaction and the actual amount he paid to have the commodity A. Utility maximization B. Producer surplus C. Consumer surplus D. Cost 10. Ordinalist theory of utility is further divided into indifference curve theory and revealed preference theory A. True B. False C. Ambiguous D. Undecided 11. The locus of combination of 2 or more commodities that give same level of satisfaction to a typical consumer is called A. Cardinal utility B. Ordinal Utility C. Indifference curve D. Revealed preference theory STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 4
12. Utility of consumer is maximized when the ration of marginal utilities and the prices of the commodities are equal A. True B. False C. Ambiguous D. Undecided 13. The total utility derived by a consumer per unit of a commodity is called A. Total utility B. Average utility C. Marginal utility 14. The equilibrium of the consumer can be determined graphically when the slope of budget line is tangential to the slope of indifference curve. A. True B. False C. Ambiguous D. Undecided 15. The theory of utility is central to consumer while theory of firm is central to the.. A. Government B. Individual C. Producer D. Society. SHORT ANSWER QUESTIONS STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 5
1. The combination of two commodities that yield the same level of satisfaction to a typical consumer is called. 2. The major similar assumption between the Cardinal and Ordinal schools of thought is 3. The cardinal school of thought is premised on the assumption that utility is 4. The locus of combination of two commodities that give the same level of satisfaction to a given consumer is.. 5. A consumer is said to be at equilibrium when the satisfaction obtained from an extra unit of commodity is equal to.. paid to acquire the commodity. 6. The locus of combination of two factor inputs that can be purchased given a monetary outlay is. 7. The school of thought of utility that believes utility is measurable is called.. While school of thought believes that utility is not measurable. STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 6
8. The ordinal approach of utility maximization is purely divided into. And. 9. A consumer is at equilibrium when the slope of budget line is tangential to the slope of 10. The law of diminishing marginal utility simply states that. THEORY 1. What do you understand by the term Utility? 2. Discuss the basic types of Utility 3. Discuss the major concepts underlying the theory of Utility 4. Draw the relationship existing among the Total Utility, Average Utility and Marginal Utility 5. Discuss extensively about the Cardinal approach to the study of Utility 6. Discuss extensively about the Ordinal approach to the study of Utility 7. Highlight the major distinctions between the Cardinal and Ordinal approaches to the study of Utility STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 7
8. What is law of diminishing marginal utility DMU? 9. What is consumer equilibrium? Demonstrate it graphically and algebraically. STARRY GOLD ACADEMY +2348023428420, +2347038174484, info@starrygoldacademy.com, www.starrygoldacademy.com Page 8