e. Fear of future rise in prices D. Consumer's ignorance

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1 I. The following are examples of cases where exceptional demand clll"vesmay occur except: A. Inferior goods B. Cases of ostentatious goods e. Fear of future rise in prices D. Consumer's ignorance 2. A fall in a commodity's price does cause the consumer's real income to increase. This Two goods A and B are said to be complementary when A. A fall in the price of A raises the demand for B B. A fall in the price of A causes a fall in the demand for B C. A fall in the price of A does not affect the demand for B D. The two goods are competitive 3. In a normal demand schedule, the quantity demanded is A. Composite demand B. Elastic demand C. Derived demand D. Competitive demand 4. A shift in the supply Clll"Ve, for a commodity when the demand curve is horizontal will lead to a change in the A. Price alone B. Quantity alone e. Price and quantity D. Quality only 5. Perfectly inelastic demand is otherwise known as A. Zero elastic B. Elastic demand C Perfectly price inelastic D. None of the above

2 6. The demand and supply functions for a commodity are Qd; 120-2P and Q,; 4P Where P is the unit cost of the commodity. The equilibrium price and quantity respectively are A. 20 and 80 R 30 and 120 C. 40 and 60 D. 60 and Microeconomics is not concerned with the behaviour of: A. Industry R Firm C.Consumer D. Aggregate Demand 8. If marginal benefit is greater than marginal cost, a rational choice involves: A. more of the activity. B. more or less, depending on the benefits of other activities. C. no more of the activity. D. less of the activity A. Goods are supplements B. Goods are jointly demanded C. Goods are complements D. Goods are substitutes 10. If the percentage change in the quantity demanded of commodity X is 80% as a result of a 40% change in it price. What is the price elasticity of demand? A. ~ ROm c.lm nl~ II. Given that beef and fish are substitutes, a rise in the price of beef relative to that of fish will A. Induce greater demand for beef B. Induce greater demand for fish C. Induce lower demand for fish D. Equate demand for beef and fish 12. The main function of the price mechanism is to A. Limit Consumer demand B. Enable producers make profit C. Allocate scarce resources among competing ends D. Ensure consumer sovereignty 13. At any price higher than the equilibrium price A. There will be excess demand B. There will be shortage C. The sellers will find some of the commodities left on their hands unsold D. All the above are correct '"

3 14.A change in supply refers to A. A shift in the whole curve B. Movement along the supply curve C. A shift backwards of the supply curve D. None of the above is correct 15. Is this a correct assertion? An increase in demand tends to increase price as well as to induce larger supply A. Wholly false B. Partly false C. Correct D. Incorrect 16. When commodities are in joint supply A. An increase in the demand for one will cause a fall in the price of the other B. A decrease in the demand for one will cause a rise in the price of the other C. A decrease in the supply of one will to an increase in the supply of the other D. An increase in demand, supply of one will cause a decrease in the supply of the other 17. If a good is an inferior good, then the total price effect is made up of A. It is also necessarily a figgen good B. The quantity of the good demanded varied inversely with price C. Its income elasticity of demand is negative D. The poor buy the good out of habit 18. If the equilibrium price ofa certain commodity is N and the government fixes its price at NIIO.OOthe supply will be A. Greater than the equilibrium supply B. Smaller than the equilibrium supply C. The same as the equilibrium supply D. None of the above 19. Dorothy has daily income of N20. each cup of coftee costs P, = N I and each scone costs p, = N4. The table below provides us with Dorothy's marginal utility (MU) received in the consumption of each good. As a utility-maximizing consumer, which combination of coffee and scones should Dorothy consume each day?. CUPS OF MUOF 'OF MUOF COFFEE COFFEE SCONES SCONES I 10 I.~O J4 (, I (, 8

4 2 coffee and 2 scones 5 coffee and 6 scones 3 coffee and 2 scones 4 coffee and 4 scones 4 coffee and 16 scones 20. To say that you can't have too much of a good thing means that for any good that you enjoy (say pizza), A. higher consumption will always lead to greater utility B. higher consumption will cause utility to increase at an increasing rate C. higher consumption will increase utility but only up to a point; after that utility will start to decrease D. it is valid to measure utility in utils 21. Which of the following goods is most likely to display increasing marginal utility over some range? A. chicken during the 1920s, when it was considered a luxury good B. paint, which you need in an amount sufficient to paint at least one entire room C. lobsters, which are so expensive that you must eat two to get your money's worth D. all of the above 22. The principle of diminishing marginal utility means that when Sarah eats pizza, her satisfaction from the second slice of pizza is probably A.. greater than that from the first B. equal to that from the first C. less than that from the first D. not comparable to tpat from the first 23. James finds a new job that doubles his income. He adjusts his consumption. From this we know that for every normal good James buys A. James's marginal utility per dollar will rise B. James's marginal utility per dollar will fall C. James's marginal utility per dollar will stay constant D. James's total utility will fall 24. The effect of changes in the condition on demand on a demand schedule holding the price constant is a A. Movement along the demand curve B. Deflation of the demand curve C. Shift of the demand curve D. None of the above

5 25. The demand for a product is said to be inelastic if A. The price elasticity of demand is less than one B. The price elasticity of demand is zero C. An increase in price results in an decrease in quantity demanded D. The price elasticity of demand is greater than one 26. A shift in the demand curve, for a commodity when the supply curve is vertical will lead to a change in the A. Price alone B. Quantity only C.Quality only D. Price and quantity The price elasticity of supply of a perishable good is Elastic B. Zero C. Inelastic 28. The marginal-utility-to-price ratio is a representation of the A. law of demand B. total satisfaction a consumer gets from a good C. additional satisfaction a consumer gets from a good D. satisfaction per dollar spent that a consumer gets from a good 29. To say that some people enjoy consumer surplus means that they A. pay less than they would have been willing to pay for a good B. more than they expect to pay for an item C. pay exactly what a good is worth to them D. pay more than the marginal utility of the product requires 30. We are unable to make interpersonal comparisons of utilities of money because A. the law of diminishing marginal utility does not apply to money Bmoney has a low total utility but a high marginal utility C. the measurement of utility in hypothetical units makes comparisons impossible D. money has a high total utility but a low marginal utility 31. Which theory is generally included under micro economics? A. Price Theory B. Income Theory C.Employment Theory D. None of the above 32. When total utility becomes maximum, then marginal utility will be- A. Minimum B Average C. Zero D. Negative 33. Marginal utility is equal to average utility at that time when average utility is- A. Increasing B. Maximum C.Falling D.Minimum 34.5uzy aows she has maximized her utility, because she is on her budget constraint and A. consumption of good X equals consumption of good Y B. what is spent on good X equals what is spent on good Y C. MUx/Px = MUylPy D. MUx=MUy

6 35. At the optimal consumption bundle A. the marginal utility of all goods consumed is equal B. the marginal utility per dollar spent is equal for all goods consumed C. the price of all goods consumed is equal D. none of the above are true 36. The income effect of a price change is the effect on the consumption of a good A. due to a change in income when all prices change in the same proportion B. due to a change in purchasing power caused by a change in the price of the good C. due to a change in income caused by a change in the price of labor D. due to a change in income sufficient to offset the effect of a price change 37.The concept of opportunity cost: A. would be irrelevant if we eliminated poverty. B. suggests a major increase in public health-care spending means an expansion in other areas will be harder to achieve. C. suggests all our wants can be achieved. D. is relevant only for a capitalist economy like the Nigeria. 38. Marginal utility theory concludes that a decrease in the price for a good increases the quantity demanded and A. Increase the demand for substitutes B. Decrease the demand for complements C. Increase income D.Increase total utility 39. Any point a given indifference curve is A. Inferior to any point on the indifference curve B. Preferred to any point on the indifference curve C. DefInitely affordable D. DefInitely unaffordable 40. A rational consumer who is eating Girl Scout cookies stops eating when A. the marginal benefit equals the marginal cost of the next cookie. B. the marginal cost of eating cookies is maximized. C. the marginal benefit of eating cookies is minimized. D. the price of the cookie equals the marginal benefit of the next cookie

7 1. (a) Discuss the Cardinal Utility Theory (b) What are the assumptions of cardinal utility theory and ordinal utility theory? 2. (a) Defme elasticity of supply (b) If the quantity of goods demanded of a product falls from 205 to 200 as a result of a rise in price from N6.00 to N9.00. (i) Calculate the elasticity of demand for the product (ii) Interpret the result (iii) Draw the corresponding graph