Multiple Choice

1. In the utility approach, what does the 'snob efdect' mean?

(a) a behavior, whereby consumers do not mind about utility.

(b) a behavior, whereby consumers derive utility from consuming expensive goods

(c) when consumers real income increases with an increase in prices

(d) only the rich can afford higher utility levels

2. What is the implication of the marginal cost curve to the cost curve if it is below the average cost curve?

(a) total cost curve has already reached its maximum

(b) average fixed costs are increasing

(c) total costs are falling

(d) average cost curve has not yet reached its minimum

3. Why do perfect substitutes have indifference curves as a straight line sloping downwards from left to right? (a) the consumers would attempt to substitute one commodity for another

(b) the marginal utility levels will always be low

(c) consumers would get the same satisfaction from any unit of the commodity

(d) it is impossible for the consumers to substitute one commodity for the other

4. Given the weighted marginal utility, what would be the impact of fall in price (if any)?

(a) a fall in the marginal utility price ratio

(b) a fall in the total utility price ratio

(c) a rise in the marginal utility price ratio

(d) no impact to the marginal utility price ratio

5. What sequence would there be for economies of scale, constant costs and diseconomies of scale on a typical long-run average costs curve?

(a) constant costs, diseconomies of scale, economies of scale

(b) diseconomies of scale, economies of scale, constant costs

(c) economies of scale, constant costs, diseconomies of scale

(d) constant costs, economies of scale, diseconomies of scale