## Lakshya Education MCQs

Question: MRS is determined by
Options:
 A. satisfaction level of the consumer B. income of the consumer C. tastes of the consumer D. preferences of the consumer
: D

MRS is always related to the choice and preferences of the consumer.

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## More Questions on This Topic :

Question 1. Which of the following describes what happens to a consumer's budget line if that consumer's budget increases? The budget line
1.    becomes steeper.
2.    shifts farther away from the origin of the graph.
3.    does not change.
4.    shifts closer to the origin of the graph.
: B

The budget line shifts farther away from the origin.
Question 2. All attainable combinations of Good-X and Good-Y are below the budget line of a consumer. State True or False.
1.    True
2.    False
3.    change in preferences
4.    change in utility
: B

All attainable combinations of Good-X and Good-Y are below as well as along the budget line.
Question 3. A consumption point inside the budget line
1.    is unaffordable.
2.    shows that the consumer spends income on only one of the goods.
3.    shows that the consumer has chosen to spend all of his or her income on both products.
4.    is possible to afford but has some unspent income.
: D

Any point inside the budget line indicates that it is possible to afford but has spent unspent income.
Question 4. Reeta buys only compact discs and tapes and spends all her income. The marginal utility from a compact disc is 30 and the marginal utility from a tape is 20. The price of a compact disc is INR 15 and the price of a tape is INR 10. To maximize her utility, Reeta should
1.    increase her consumption of compact discs
2.    Increase her consumption of tapes
3.    not change her consumption of compact discs and tapes
4.    lower the price of a tape
: C

MCCDs/PCDs=MUtape/Ptape. Reeta is already maximizing her utility.
Question 5. In a situation when MRS>PX/PY, the consumer would react by
1.    diminishing the consumption of commodity-X
2.    increasing the consumption of commodity-Y
3.    increasing the consumption of commodity-X
4.    none of these
: C

MRS is the amount of Good-Y which a consumer is willing to give up for one unit more of Good-X. In a situation when MRS>PX/PY, the consumer would react by increasing the consumption of commodity-X.
Question 6. Suppose a consumer has INR 100 to spend on two goods, shoes and shirts. If the price of a pair of shoes is INR 20 per pair and the price of a shirt is INR 15 each, which of the following combinations is unaffordable to the consumer?
1.    0 pairs of shoes and 0 shirts
2.    2 pairs of shoes and 4 shirts
3.    5 pairs of shoes and 0 shirts
4.    0 pairs of shoes and 7 shirts