Indifference Curve

MCQs

1. What is an indifference curve?
2. 1. a representation to depict the demand & supply of goods.
   2.  a graph to show that the marginal utility of each commodity changes with changes in the price of goods.
   3. a graph that depicts a combination of two items that provides a consumer with equal utility and satisfaction.
   4.  a representation to show consumer satisfaction in relation to the price of the goods.

Answer – C

Explanation: A graph illustrating a combination of two things that offers a consumer equal utility and satisfaction is known as an indifference curve. 

2. Which of the following are properties of indifference curves?
3. 1. indifference curves can never cross,
   2.  the lower the utility indicated by a farther out indifference curve,
   3.  indifference curves always slope upwards, and
   4.  indifference curves are concave.

Answer – A

Explanation: The arcs of indifference cannot cross one other. The reason for this is that at the point of tangency, the higher curve will provide the same amount of the two commodities as the lower indifference curve. This is unreasonable and incomprehensible.

3. What are the indifference curve assumptions?
4. 1.  The consumer behaves logically in order to achieve maximum fulfillment.
   2. The consumer behaves logically in order to achieve minimum fulfillment. (c) The consumer behaves logically in order to achieve maximum demand.
   3. The consumer behaves logically in order to achieve minimum demand. 

Answer – A

Explanation: Because of monotonic inclination, a higher indifference curve implies a large bundle of goods, indicating greater value. A higher level of customer satisfaction is indicated by a higher indifference curve.

4. Why is the curve of indifference convex?
5. 1. The marginal rate of substitution increases.
   2. The prices of the goods in the market keep varying.
   3. Because the marginal utility of each commodity ingested declines with successive consumption.
   4. Quantities of goods consumption vary as per customer demands. 

Answer –C

Explanation: Since the marginal utility of each commodity ingested declines with successive consumption, indifference curves are convex to the origin. The marginal rate of substitution is the basis for this convex connection.

5. What does the L shaped indifference curve indicate?
6. 1. The prices of the goods are different from each other though the utility may be identical and are represented by an L-shaped indifference curve.
   2. The prices of the goods are dynamic and are represented by an L-shaped indifference curve.
   3. The prices of two goods known to the consumer are represented by an L-shaped indifference curve.
   4.  Two products that are ideal complements to each other are represented by an L-shaped indifference curve. 

Answer – D

Explanation: The marginal rate of substitution is constant, which is the defining criteria for perfect substitutes. Right and left shoes, for example, are an example of complementary commodities. You can’t have one without the other. As a result, the indifference curves take on an L form. 

6. What are Indifference curves used to study? 
7. 1. Purchase demands.
   2. Consumer preferences.
   3. Target markets.
   4. Customer behavior. 

Answer – B

Explanation: To examine consumer preferences, indifference curves are utilized. Each point on the indifference curve represents a consumer who is unconcerned about the two products because they both provide the same utility.

7. As you move down an indifference curve, you’ll see that:
8. 1. Some consumers prefer one consumption stand over another.
   2.  As more of a good is consumed, the marginal rate of substitution increases.
   3.  The rate of marginal substitution is constant.
   4. Consumers have no preference for one type of consumption over another.

Answer – D

Explanation: As more of a good is used, the marginal rate of substitution increases. The consumer does not have a preference for one type of consumption over another.

8. Which of the following is the slope of the indifference curve?
9. 1. One.
   2. Marginal rate of substitution.
   3. Marginal utility.
   4.  None of the above.

Answer – B

Explanation: The marginal rate of substitution is the slope of the indifference curve at any provided position all along the curve and represents a margin of utility for every pairing of “Product X” and “Product Y.” 

9. Which of the following is not an indifference curve property?
10. 1. The satisfaction level rises as the indifference curves climb.
    2.  The indifference curve is slanted downward.
    3. The indifference curve is concave in the direction of the origin.
    4.  It is impossible for two indifference curves to intersect.

Answer –C

Explanation: As the law of Diminishing marginal rate of substitution is followed by indifference curves, they are always convex in the direction of the origin.

10. Utility, according to Hicks and Allen:
11. 1. Is quantifiable in cardinal numbers
    2. Is quantifiable in ordinal numbers
    3.  It’s impossible to quantify.
    4.  Isn’t possible to express.

Answer – B

Explanation: Hicks and Allen were British economists who worked together to establish the ordinal value theory. When a consumer makes a rational decision to purchase a commodity, they derive utility as high or low, according to the idea.

11. A higher indifference curve in the indifference map suggests which of the following?
12. 1. A lower level of contentment
    2. Satisfaction at the same level
    3.  A higher level of contentment
    4. A greater or equal level of satisfaction

Answer –C

Explanation: Higher indifference curves on an indifference map indicate a higher level of pleasure since consumption of both commodities climbs.

12. Because of which of the following, two indifference curves cannot cut each other?
13. 1.  Each satisfaction level is represented by a separate indifference curve.
    2.  They are combinations of two commodities that provide the same level of satisfaction.
    3.   The slope is negative.
    4. They are convex in the direction of origin.

Answer – A

Explanation: The indifference curves cannot cross one other. The reason for this is that at the point of tangency, the higher curve will provide the same amount of the two commodities as the lower indifference curve.

13. Which of the following is connected to an indifference curve?
14. 1. Goods X and Y prices
    2.  Income of the consumer
    3. Total utility from X and Y commodities
    4. Consumer preferences and choices

Answer – D

Explanation: An indifference curve depicts a combination of two items that provide the same level of satisfaction and usefulness to the consumer, resulting in indifference.

14. Because more of one commodity and less of another results in which of the following, an Indifference curve slopes down to the right?
15. 1.  Cutbacks in spending
    2. The same level of satisfaction
    3.  The highest level of satisfaction
    4. Higher levels of satisfaction

Answer – B

Explanation: A single indifference curve provides the same level of utility at all places. Higher indifference curves indicate higher utility levels. Hence if more of one commodity and less of another, the level of satisfaction remains the same.

15. If an Indifference Curve slopes towards the right, when the quantity of one commodity in combination is increased, the amount of the other commodity
16. 1.  Increase
    2.  Reduces
    3. Reflects no change
    4. None of the above

Answer – B

Explanation: Because one good increases while the other decreases, the Indifference Curve always slopes downwards to the right.

16. What causes shifts in indifference curves?
17. 1. marginal rate of substitution
    2. marginal demand
    3. Supply
    4. None of the above

Answer – 

Explanation: As a result of the diminishing marginal utility of both items, the quantity of one good that would be traded for the other to maintain utility varies.

17. Is it possible for an indifference curve to be concave to the origin?
18. 1.  No, indifference curves are always convex to the origin
    2.  Yes, in special cases, the indifference curve can be concave to the origin
    3.  Indifference curves can move in any direction from the origin.
    4.  None of the above

Answer – B

Explanation: In a circumstance when a customer considers one commodity to be dangerous while consuming the other commodity, regardless of price,  though they can receive maximal happiness, an indifference curve can be concave to the origin.

18. Is the Indifference Curve appropriate for a cardinalist or ordinal approach?
19. 1. Cardinalist approach
    2.  Ordinalist approach
    3.   Both of ordinal approach & Cardinalist approach
    4.  None of the above

Answer – B

Explanation: Because of the measurable commodities, the Indifference curve is for the Ordinal method. The indifference curve, which is based on the ordinal method, depicts the many combinations of two commodities that provide the customer with the same amount of utility or satisfaction.

19. The budget line depicts how many products a consumer can afford with his limited income indifference curve the combination of two goods that provide
20. 1.  Maximum satisfaction
    2. an equivalent level of satisfaction.
    3.  Least satisfaction
    4. None of the above

Answer – B

Explanation: The budget line, also known as a budget line, depicts a combination of two commodities that buyers can purchase. The points and indifference curve have the same satisfaction objective.