1. The Law of Diminishing Marginal Utility states that:
A. Total utility decreases continuously
B. Marginal utility increases with consumption
C. Marginal utility declines as consumption increases
D. Total utility becomes zero after first unit
Answer: C
Rationale: LDMU explains that marginal utility falls with each additional unit consumed.
2. The concept of marginal utility refers to:
A. Total satisfaction from all units
B. Average satisfaction per unit
C. Additional satisfaction from one extra unit
D. Maximum satisfaction
Answer: C
Rationale: Marginal utility is the change in total utility due to consumption of one more unit.
3. The LDMU was first systematically explained by:
A. Adam Smith
B. Alfred Marshall
C. J.M. Keynes
D. David Ricardo
Answer: B
Rationale: Alfred Marshall popularized the law of diminishing marginal utility.
4. According to LDMU, marginal utility becomes zero when:
A. Consumption starts
B. Total utility is maximum
C. Total utility is minimum
D. Consumption stops
Answer: B
Rationale: Marginal utility is zero at the point of maximum total utility.
5. When marginal utility becomes negative, total utility:
A. Increases
B. Remains constant
C. Decreases
D. Becomes infinite
Answer: C
Rationale: Negative marginal utility reduces total utility.
6. The LDMU curve slopes:
A. Upward from left to right
B. Downward from left to right
C. Vertically upward
D. Horizontally
Answer: B
Rationale: Diminishing marginal utility implies a downward-sloping MU curve.
7. The LDMU is applicable under which condition?
A. Different goods consumed
B. Continuous consumption of same good
C. Change in tastes
D. Change in income
Answer: B
Rationale: The law applies when successive units of the same commodity are consumed.
8. The X-axis of the LDMU curve represents:
A. Price
B. Total utility
C. Quantity consumed
D. Marginal utility
Answer: C
Rationale: Quantity consumed is measured on the X-axis.
9. The Y-axis of the LDMU curve represents:
A. Quantity
B. Price
C. Marginal utility
D. Total utility
Answer: C
Rationale: Marginal utility is measured on the Y-axis.
10. Which of the following best explains LDMU?
A. Scarcity of goods
B. Change in income
C. Intensity of want decreases
D. Increase in price
Answer: C
Rationale: Satisfaction from each additional unit falls because want intensity declines.
11. The LDMU assumes:
A. Change in income
B. Change in taste
C. Rational consumer
D. Multiple goods consumption
Answer: C
Rationale: The consumer is assumed to be rational.
12. Which utility decreases according to LDMU?
A. Total utility
B. Average utility
C. Marginal utility
D. Maximum utility
Answer: C
Rationale: It is marginal utility that diminishes, not total utility initially.
13. The law explains the:
A. Law of supply
B. Law of demand
C. Law of returns
D. Law of substitution
Answer: B
Rationale: LDMU forms the psychological basis of the law of demand.
14. Marginal utility is equal to:
A. TUₙ − TUₙ₋₁
B. TU ÷ Q
C. Q ÷ TU
D. TU + Q
Answer: A
Rationale: MU is the change in total utility from an extra unit.
15. The marginal utility curve intersects the X-axis at:
A. Maximum MU
B. Zero MU
C. Negative MU
D. Minimum TU
Answer: B
Rationale: Intersection occurs when MU becomes zero.
16. The LDMU does NOT apply when:
A. Consumption is continuous
B. Units are identical
C. Tastes remain constant
D. Goods are indivisible
Answer: D
Rationale: Divisibility of goods is an essential assumption.
17. Which utility curve rises first and then falls?
A. MU curve
B. Price curve
C. Demand curve
D. TU curve
Answer: D
Rationale: Total utility increases initially and later decreases.
18. The LDMU curve is drawn assuming:
A. Different consumers
B. Same commodity units
C. Changing income
D. Price fluctuation
Answer: B
Rationale: Units must be homogeneous for comparison.
19. When MU is positive but diminishing, TU is:
A. Constant
B. Decreasing
C. Increasing at decreasing rate
D. Negative
Answer: C
Rationale: TU rises but at a slower rate.
20. The point where MU becomes zero is called:
A. Indifference point
B. Break-even point
C. Saturation point
D. Equilibrium point
Answer: C
Rationale: Saturation point gives maximum satisfaction.
21. Which utility becomes negative after the saturation point?
A. Total utility
B. Marginal utility
C. Average utility
D. Maximum utility
Answer: B
Rationale: Additional units cause disutility.
22. The LDMU supports the idea that:
A. More is always better
B. Consumer satisfaction is unlimited
C. Wants are satiable
D. Utility is measurable exactly
Answer: C
Rationale: LDMU assumes human wants can be satisfied.
23. The LDMU is also known as:
A. Law of supply
B. Gossen’s First Law
C. Gossen’s Second Law
D. Law of equi-marginal utility
Answer: B
Rationale: Hermann Gossen formulated this law.
24. Which of the following violates LDMU?
A. Drinking water when thirsty
B. Eating sweets continuously
C. Collecting rare coins
D. Consuming food after hunger
Answer: C
Rationale: Rare collections may increase satisfaction.
25. LDMU is a:
A. Psychological law
B. Technical law
C. Legal law
D. Statistical law
Answer: A
Rationale: It explains human behavior and satisfaction.
26. The concept of LDMU belongs to:
A. Welfare economics
B. Monetary economics
C. Microeconomics
D. Macroeconomics
Answer: C
Rationale: Utility analysis is part of microeconomics.
27. Which utility can be measured in cardinal numbers according to Marshall?
A. Marginal utility only
B. Total utility only
C. Both TU and MU
D. None of the above
Answer: C
Rationale: Marshall assumed utility is cardinally measurable.
28. When MU is falling, TU:
A. Falls immediately
B. Remains constant
C. Rises at decreasing rate
D. Becomes negative
Answer: C
Rationale: TU rises until MU becomes zero.
29. The LDMU assumes that:
A. Units are consumed at different times
B. Consumption is continuous
C. Price changes
D. Income varies
Answer: B
Rationale: Consumption should be continuous without time gap.
30. Which curve is always downward sloping?
A. TU curve
B. MU curve
C. Average utility curve
D. Price curve
Answer: B
Rationale: MU declines continuously under LDMU.
31. The law helps in explaining:
A. Consumer surplus
B. Producer surplus
C. National income
D. Inflation
Answer: A
Rationale: Consumer surplus is based on diminishing MU.
32. If MU is zero, TU is:
A. Zero
B. Negative
C. Maximum
D. Minimum
Answer: C
Rationale: TU is maximum when MU is zero.
33. Which of the following is an assumption of LDMU?
A. Multiple goods consumption
B. Change in fashion
C. Rational behavior
D. Price fluctuation
Answer: C
Rationale: Consumer rationality is essential.
34. The LDMU does not apply to:
A. Food items
B. Water
C. Addictive goods
D. Daily necessities
Answer: C
Rationale: Addictive goods may not show diminishing satisfaction.
35. The law is applicable in:
A. Short run only
B. Long run only
C. Both short and long run
D. Market period only
Answer: A
Rationale: Preferences may change in the long run.
36. The slope of MU curve is:
A. Positive
B. Zero
C. Negative
D. Infinite
Answer: C
Rationale: MU decreases with consumption.
37. When TU is falling, MU is:
A. Positive
B. Zero
C. Negative
D. Constant
Answer: C
Rationale: Negative MU reduces TU.
38. LDMU helps explain why:
A. Demand curve slopes upward
B. Supply curve slopes upward
C. Demand curve slopes downward
D. Cost curve slopes downward
Answer: C
Rationale: Lower MU leads to lower willingness to pay.
39. The law applies only when:
A. Consumer is irrational
B. Goods are complementary
C. Units are identical
D. Goods are durable
Answer: C
Rationale: Homogeneous units are required.
40. Which utility reaches maximum first?
A. MU
B. TU
C. Average utility
D. Price utility
Answer: B
Rationale: TU reaches maximum when MU is zero.
41. The LDMU curve never touches:
A. X-axis
B. Y-axis
C. Origin
D. Price axis
Answer: B
Rationale: MU starts from positive value.
42. The law implies that:
A. Satisfaction increases always
B. Satisfaction is constant
C. Satisfaction eventually declines
D. Satisfaction is immeasurable
Answer: C
Rationale: Additional units reduce satisfaction.
43. LDMU is violated when:
A. Consumer is hungry
B. Consumption is excessive
C. Utility increases with each unit
D. Units are divisible
Answer: C
Rationale: Increasing MU contradicts the law.
44. The law applies best to:
A. Luxuries
B. Necessities
C. Inferior goods
D. Public goods
Answer: B
Rationale: Basic needs show diminishing satisfaction clearly.
45. The LDMU curve is drawn assuming:
A. Money income constant
B. Price constant
C. Taste constant
D. All of the above
Answer: D
Rationale: All are standard assumptions.
46. The concept of utility is:
A. Objective
B. Psychological
C. Technical
D. Legal
Answer: B
Rationale: Utility is a subjective feeling.
47. Who first stated the idea of diminishing utility?
A. Alfred Marshall
B. Adam Smith
C. Hermann Gossen
D. Pigou
Answer: C
Rationale: Gossen first stated the law.
48. LDMU helps explain why consumers:
A. Buy more at higher prices
B. Prefer variety
C. Demand less at higher prices
D. Ignore prices
Answer: C
Rationale: Lower MU leads to lower willingness to pay.
49. The law is based on:
A. Production cost
B. Market demand
C. Human behavior
D. Government policy
Answer: C
Rationale: It explains consumer psychology.
50. The LDMU is most relevant to:
A. Producer behavior
B. Consumer behavior
C. Government planning
D. International trade
Answer: B
Rationale: It explains how consumers derive satisfaction.
%20(2).png)
 for Agricultural Exams){kind=link}
0 Comments