CUET UG Economics Booster Test 2 - Utility Analysis Fundamentals -

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CUET UG Economics Booster Test 2 - Utility Analysis Fundamentals

⏱️ 30 Minutes

❓ 20 Questions

📌 Answers are locked once submitted — results and explanations appear at the end.

CUET UG Economics Booster Test 2 - Utility Analysis Fundamentals

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QUESTION 1 OF 20

Given the values of Total Utility (TU) at successive units of consumption: 12, 18, 22, 24. Arrange the calculated Marginal Utilities (MU) in the correct sequential order of consumption:
1. 2
2. 4
3. 12
4. 6

Answer Review

1 Given the values of Total Utility (TU) at successive units of consumption: 12, 18, 22, 24. Arrange the calculated Marginal Utilities (MU) in the correct sequential order of consumption:
1. 2
2. 4
3. 12
4. 6

A 3, 4, 2, 1

B 1, 2, 4, 3

C 3, 2, 4, 1

D 4, 3, 2, 1

💡 Short Explanation

MU = Change in TU. MU values are 12, 6, 4, 2. Sequence becomes 3, 4, 2, 1.

✅ Correct Answer Explanation

Marginal Utility is calculated as the change in Total Utility. TU values: 12, 18, 22, 24 MU₁ = 12 MU₂ = 18 − 12 = 6 MU₃ = 22 − 18 = 4 MU₄ = 24 − 22 = 2 So the correct MU order is: 12, 6, 4, 2 That corresponds to: 3, 4, 2, 1

❓ Why Other Options Are Incorrect

B. Incorrect sequence of MU values.
C. Places 4 before 6 incorrectly.
D. Starts with 6 instead of 12.

🎯 Strategy

Used

Substitution

🧠 Memory Trick

MU = New TU − Previous TU

📚 Class XI Economics – Theory of Consumer Behaviour – Marginal Utility Calculation

2 Assertion (A): Under Cardinal Utility Theory, a consumer states utility in the form of numbers.
Reason (R): In real life, expressing utility in the form of numbers is considered a major drawback because we only rank alternative combinations.

A Both A and R are true and R correctly explains A

B Both A and R are true, but R does not explain A

C A is true, R is false

D A is false, R is true

💡 Short Explanation

Cardinal utility measures utility in numbers. In real life, utility is usually ranked, not measured. The reason states a drawback, not the explanation of assertion.

✅ Correct Answer Explanation

The Assertion is true because Cardinal Utility Theory assumes that utility can be measured numerically. The Reason is also true because in real life consumers usually rank bundles instead of assigning exact numbers to satisfaction. However, the Reason does not explain why cardinal theory measures utility numerically. It only explains the limitation of that theory.

❓ Why Other Options Are Incorrect

A. Reason is true but does not correctly explain the Assertion.
C. Reason is not false.
D. Assertion is not false.

🎯 Strategy

Used

Assertion-Reason Analysis

🧠 Memory Trick

Cardinal = Count, Ordinal = Order

📚 Class XI Economics – Theory of Consumer Behaviour – Cardinal Utility Theory

3 Based on the relationship between MU and TU, which of the following statements are analytically correct?
I. Total utility increases at a diminishing rate when marginal utility diminishes.
II. Total utility remains constant at the level where MU becomes zero.
III. Total utility starts falling and MU becomes negative after the constant phase.

A I and II only

B II and III only

C I and III only

D I, II, and III

💡 Short Explanation

Positive but falling MU makes TU rise slowly. Zero MU makes TU maximum/constant. Negative MU makes TU fall.

✅ Correct Answer Explanation

When MU is positive but diminishing, TU increases at a diminishing rate. When MU becomes zero, TU reaches its maximum and remains constant at that point. After that, when MU becomes negative, TU starts falling. Therefore, all three statements are correct.

❓ Why Other Options Are Incorrect

A. Omits correct Statement III.
B. Omits correct Statement I.
C. Omits correct Statement II.

🎯 Strategy

Used

Conceptual Relationship Analysis

🧠 Memory Trick

MU positive → TU rises; MU zero → TU maximum; MU negative → TU falls

📚 Class XI Economics – Theory of Consumer Behaviour – Relationship between TU and MU

4 Match the Total Utility levels with their corresponding Marginal Utility states based on standard consumption behavior.

List I	List II
1. Total utility is increasing at a diminishing rate	a. Marginal utility is zero
2. Total utility remains constant	b. Marginal utility becomes negative
3. Total utility starts falling	c. Marginal utility is positive but diminishing

A 1-c, 2-a, 3-b

B 1-a, 2-b, 3-c

C 1-c, 2-b, 3-a

D 1-b, 2-a, 3-c

💡 Short Explanation

TU rises when MU is positive. TU is constant when MU is zero. TU falls when MU is negative.

✅ Correct Answer Explanation

Total Utility increases at a diminishing rate when Marginal Utility is positive but diminishing. Total Utility remains constant when Marginal Utility becomes zero. Total Utility starts falling when Marginal Utility becomes negative. Correct matching: 1-c, 2-a, 3-b

❓ Why Other Options Are Incorrect

B. Incorrectly matches increasing TU with zero MU.
C. Incorrectly matches constant TU with negative MU.
D. Incorrectly matches falling TU with diminishing positive MU.

🎯 Strategy

Used

Concept Mapping

🧠 Memory Trick

Positive MU → Rising TU; Zero MU → Constant TU; Negative MU → Falling TU

📚 Class XI Economics – Theory of Consumer Behaviour – Total Utility and Marginal Utility

5 Match the units consumed with the correct MU calculated from the TU sequence (12, 18, 22, 24, 24, 22).

List I	List II
1. 2nd Unit	a. MU = 0
2. 5th Unit	b. MU = -2
3. 6th Unit	c. MU = 6

A 1-c, 2-a, 3-b

B 1-a, 2-b, 3-c

C 1-b, 2-c, 3-a

D 1-c, 2-b, 3-a

💡 Short Explanation

MU₂ = 18 − 12 = 6. MU₅ = 24 − 24 = 0. MU₆ = 22 − 24 = -2.

✅ Correct Answer Explanation

Using the formula: MUₙ = TUₙ − TUₙ₋₁ For the 2nd unit: 18 − 12 = 6 For the 5th unit: 24 − 24 = 0 For the 6th unit: 22 − 24 = -2 Thus, the correct matching is: 1-c, 2-a, 3-b

❓ Why Other Options Are Incorrect

B. Incorrectly assigns MU = 0 to the 2nd unit.
C. Incorrectly assigns negative MU to the 2nd unit.
D. Interchanges MU of 5th and 6th units.

🎯 Strategy

Used

Substitution

🧠 Memory Trick

MU = Difference between two TU values

📚 Class XI Economics – Theory of Consumer Behaviour – Marginal Utility

6 Which specific measure captures the rate of change in total utility due to a change in the quantity of a commodity consumed?

A Aggregate Satisfaction

B Marginal Utility

C Indifference Rate

D Monotonic Preference

💡 Short Explanation

MU measures additional utility. It shows change in TU. It is caused by consuming one more unit.

✅ Correct Answer Explanation

Marginal Utility measures the change in Total Utility caused by the consumption of an additional unit of a commodity. So, it captures the rate of change in total satisfaction when quantity consumed changes.

❓ Why Other Options Are Incorrect

A. Aggregate Satisfaction means Total Utility.
C. Indifference Rate is not the standard concept.
D. Monotonic Preference refers to preference for more goods.

🎯 Strategy

Used

Concept Identification

🧠 Memory Trick

Marginal = Change caused by one more unit

📚 Class XI Economics – Theory of Consumer Behaviour – Marginal Utility

7 If MU1 = 12, MU2 = 6, and MU3 = 4, the Total Utility derived from consuming 3 units is calculated as ____________, which equals 22.

A MU1 × MU2 × MU3

B MU1 + MU2 + MU3

C MU3 - MU1

D MU1 / MU3

💡 Short Explanation

TU is the sum of MUs. Add all marginal utilities. 12 + 6 + 4 = 22.

✅ Correct Answer Explanation

Total Utility is calculated by adding the marginal utilities of all units consumed. TU₃ = MU₁ + MU₂ + MU₃ TU₃ = 12 + 6 + 4 TU₃ = 22 Therefore, the correct expression is MU1 + MU2 + MU3.

❓ Why Other Options Are Incorrect

A. Multiplication is not used.
C. Subtraction does not give TU.
D. Division is not used to calculate TU.

🎯 Strategy

Used

Formula Application

🧠 Memory Trick

TU = Total of all MU

📚 Class XI Economics – Theory of Consumer Behaviour – TU and MU Relationship

8 Which statements correctly reflect the formula MUn = TUn - TUn-1?
I. It calculates the total utility of all units up to n.
II. It measures the change in total utility due to the consumption of the nth unit alone.
III. The subscript n refers to the nth unit of the commodity.

A I and II only

B II and III only

C I and III only

D I, II, and III

💡 Short Explanation

MU measures change in TU. It is linked to the nth unit. It does not calculate total utility.

✅ Correct Answer Explanation

The formula: MUₙ = TUₙ − TUₙ₋₁ calculates the marginal utility of the nth unit. It measures the change in total utility caused by consuming the nth unit alone. The symbol n refers to the nth unit of the commodity. Statement I is incorrect because the formula does not calculate total utility.

❓ Why Other Options Are Incorrect

A. Includes incorrect Statement I.
C. Includes incorrect Statement I and omits Statement II.
D. Includes incorrect Statement I.

🎯 Strategy

Used

Formula Interpretation

🧠 Memory Trick

MUₙ = Utility added by nth unit

📚 Class XI Economics – Theory of Consumer Behaviour – Marginal Utility Formula

9 The Law of Diminishing Marginal Utility holds true while keeping the consumption of other commodities ____________.

A Increasing

B Decreasing

C Constant

D Fluctuating

💡 Short Explanation

The law assumes other factors remain unchanged. Consumption of other goods must be constant. This is the ceteris paribus condition.

✅ Correct Answer Explanation

The Law of Diminishing Marginal Utility states that as consumption of a commodity increases, marginal utility from each additional unit declines, keeping consumption of other commodities constant. This assumption is necessary to isolate the effect of consuming more units of one commodity.

❓ Why Other Options Are Incorrect

A. Increasing other goods changes utility conditions.
B. Decreasing other goods changes consumer satisfaction.
D. Fluctuation violates the assumption of the law.

🎯 Strategy

Used

Condition Identification

🧠 Memory Trick

DMU works when other things stay constant

📚 Class XI Economics – Theory of Consumer Behaviour – Law of Diminishing Marginal Utility

10 If the desire for a commodity weakens strictly as per the law of diminishing marginal utility, what must be true for the marginal utilities of successive units n and n+1?

A MUn < MUn+1

B MUn > MUn+1

C MUn = MUn+1

D MUn + MUn+1 = 0

💡 Short Explanation

MU falls with successive consumption. The next unit gives less satisfaction. Therefore, MUn is greater than MUn+1.

✅ Correct Answer Explanation

According to the Law of Diminishing Marginal Utility, each successive unit of a commodity provides less additional satisfaction than the previous unit. Therefore: MUₙ > MUₙ₊₁ This means the marginal utility of the nth unit is greater than the marginal utility of the next unit.

❓ Why Other Options Are Incorrect

A. Shows increasing MU, which is opposite to the law.
C. Shows constant MU, not diminishing MU.
D. No such condition is required.

🎯 Strategy

Used

Concept Equation

🧠 Memory Trick

Next unit gives less extra satisfaction

📚 Class XI Economics – Theory of Consumer Behaviour – Law of Diminishing Marginal Utility

11 Arrange the individuals in descending order of utility derived from consuming a single piece of chocolate, based on subjective preference variation:
1. A person who completely dislikes chocolate.
2. A person who likes chocolate.
3. A person who is not so fond of chocolate.

A 2, 3, 1

B 1, 3, 2

C 2, 1, 3

D 3, 2, 1

💡 Short Explanation

Utility is subjective. Different individuals derive different satisfaction from the same commodity. A chocolate lover derives the highest utility.

✅ Correct Answer Explanation

Utility depends on an individual's preferences. A person who likes chocolate derives the highest satisfaction from consuming it. A person who is not very fond of chocolate derives a lower level of satisfaction, while a person who completely dislikes chocolate derives the least utility. Therefore, the descending order of utility is: Likes chocolate > Not so fond of chocolate > Completely dislikes chocolate Hence, the correct sequence is 2, 3, 1.

❓ Why Other Options Are Incorrect

B. Places the person who dislikes chocolate first, which is incorrect.
C. Places the person who dislikes chocolate above someone who is not so fond of chocolate.
D. Places the chocolate lover after someone who is only moderately interested.

🎯 Strategy

Used

Application of the concept of subjective utility.

🧠 Memory Trick

"More liking = More utility."

📚 Class XI Economics – Theory of Consumer Behaviour – Subjective Nature of Utility

12 The text establishes that utility is not absolute but subjective, because the utility one individual gets from the use of a room heater depends upon whether the individual is in Ladakh or Chennai, representing a change in ____________.

A Price and income

B Place

C Market supply

D Cardinal numbering

💡 Short Explanation

Utility varies with location. A room heater is more useful in colder regions. This illustrates the place factor.

✅ Correct Answer Explanation

Utility is subjective and changes according to circumstances such as place and time. A room heater provides high utility in a cold place like Ladakh but much lower utility in a warmer place like Chennai. Thus, the example demonstrates that utility changes with place.

❓ Why Other Options Are Incorrect

A. The example is unrelated to price or income.
C. Market supply does not determine the satisfaction derived from using a heater.
D. Cardinal numbering refers to numerical measurement of utility, not place.

🎯 Strategy

Used

Application of the subjective nature of utility.

🧠 Memory Trick

"Cold place → More heater utility."

📚 Class XI Economics – Theory of Consumer Behaviour – Subjective Nature of Utility

13 Match the bundles based on Monotonic Preferences if Goods 1 and 2 are desired.

List I	List II
1. Bundle (10, 10) vs Bundle (9, 9)	a. Prefers (10, 10) because it has more of one good and no less of the other.
2. Bundle (10, 10) vs Bundle (10, 9)	b. Prefers (10, 10) because it has more of both goods.
3. Bundle (8, 12) vs Bundle (8, 10)	c. Prefers (8, 12) because it has more of the second good and no less of the first.
4. Bundle (12, 8) vs Bundle (10, 8)	d. Prefers (12, 8) because it has more of the first good and no less of the second.

A 1-b, 2-a, 3-c, 4-d

B 1-a, 2-b, 3-d, 4-c

C 1-b, 2-d, 3-a, 4-c

D 1-c, 2-a, 3-b, 4-d

💡 Short Explanation

Consumers prefer bundles with more of both goods. A bundle with more of one good and no less of the other is also preferred. This follows the principle of Monotonic Preferences.

✅ Correct Answer Explanation

According to Monotonic Preferences, consumers always prefer a bundle that contains more of at least one good without having less of the other. 1. (10,10) vs (9,9) → (10,10) has more of both goods → b 2. (10,10) vs (10,9) → Same first good, more of the second good → a 3. (8,12) vs (8,10) → Same first good, more of the second good → c 4. (12,8) vs (10,8) → More of the first good, second good unchanged → d Therefore, the correct matching is: 1-b, 2-a, 3-c, 4-d

❓ Why Other Options Are Incorrect

B. Incorrectly reverses the first two matches and swaps the last two.
C. Incorrectly matches the preference conditions for Bundles 2 and 3.
D. Assigns incorrect preference descriptions to multiple bundle comparisons.

🎯 Strategy

Used

Application of the Monotonic Preference Principle.

🧠 Memory Trick

"More of one, none less of the other → Always preferred."

📚 Class XI Economics – Theory of Consumer Behaviour – Monotonic Preferences

14 Arrange these bundles in ascending order of satisfaction according to monotonic preferences, assuming combinations consist of the same quantity of mangoes but different quantities of bananas:
1. (2 Bananas, 10 Mangoes)
2. (3 Bananas, 10 Mangoes)
3. (1 Banana, 10 Mangoes)

A 3, 1, 2

B 1, 2, 3

C 2, 1, 3

D 3, 2, 1

💡 Short Explanation

Mangoes remain constant. More bananas mean greater satisfaction. Satisfaction increases with quantity.

✅ Correct Answer Explanation

Since the number of mangoes remains constant in all bundles, satisfaction depends only on the number of bananas. According to monotonic preferences, more bananas provide higher satisfaction. Thus, (1 Banana,10 Mangoes) < (2 Bananas,10 Mangoes) < (3 Bananas,10 Mangoes) Therefore, the ascending order of satisfaction is: 3, 1, 2

❓ Why Other Options Are Incorrect

B. Starts with a higher satisfaction bundle.
C. Gives the highest satisfaction bundle first.
D. Completely reverses the correct order.

🎯 Strategy

Used

Ordering based on Monotonic Preferences.

🧠 Memory Trick

"Same mangoes → More bananas = More satisfaction."

📚 Class XI Economics – Theory of Consumer Behaviour – Monotonic Preferences

15 A curve joining all points representing bundles among which the consumer is indifferent is called an ____________ curve.

A Inelastic demand

B Indifference

C Iso-utility

D Equal budget

💡 Short Explanation

It joins bundles providing equal satisfaction. The consumer has no preference among these bundles. Such a curve is called an Indifference Curve.

✅ Correct Answer Explanation

An Indifference Curve is a curve joining all combinations of two goods that provide the consumer with the same level of satisfaction. Since every point on the curve gives equal utility, the consumer is indifferent among all the combinations lying on that curve.

❓ Why Other Options Are Incorrect

A. Inelastic demand refers to price elasticity, not consumer satisfaction.
C. Although "iso-utility" means equal utility, the NCERT term is Indifference Curve.
D. A budget line represents combinations affordable to the consumer, not equal satisfaction.

🎯 Strategy

Used

Concept Identification.

🧠 Memory Trick

"Equal satisfaction → Indifference Curve."

📚 Class XI Economics – Theory of Consumer Behaviour – Indifference Curve

16 Which of the following statements are true about the downward slope of an Indifference Curve?
I. An increase in bananas must be compensated by a decrease in mangoes to remain on the same indifference curve.
II. Marginal utility of both goods increases simultaneously.
III. If the consumer does not forego mangoes after obtaining more bananas, the consumer moves to a higher indifference curve.

A I only

B I and III only

C II and III only

D I, II, and III

💡 Short Explanation

An indifference curve represents a constant level of satisfaction. More of one good requires less of the other to maintain the same utility. Without sacrificing the other good, satisfaction increases.

✅ Correct Answer Explanation

An Indifference Curve shows combinations of two goods that provide the consumer with the same level of satisfaction. Statement I is correct because if the consumer receives more bananas, some mangoes must be given up to keep utility unchanged. Statement III is also correct because if bananas increase without reducing mangoes, the consumer obtains more of at least one good and no less of the other, thereby moving to a higher indifference curve. Statement II is incorrect because the marginal utilities of both goods do not necessarily increase simultaneously. Therefore, the correct answer is I and III only.

❓ Why Other Options Are Incorrect

A. Ignores Statement III, which is also correct.
C. Includes Statement II, which is incorrect.
D. Incorrect because Statement II is false.

🎯 Strategy

Used

Application of the properties of the Indifference Curve.

🧠 Memory Trick

"Same IC = More of one, Less of the other."

📚 Class XI Economics – Theory of Consumer Behaviour – Indifference Curve

17 Assertion (A): The amount of mangoes that the consumer has to forego to get an additional banana is called the Marginal Rate of Substitution (MRS).
Reason (R): The consumer substitutes goods so that her total utility remains the same.

A Both A and R are true and R explains A.

B Both A and R are true, but R does not explain A.

C A is true, R is false.

D A is false, R is true.

💡 Short Explanation

MRS measures the trade-off between two goods. The trade-off maintains the same level of satisfaction. The reason correctly explains the assertion.

✅ Correct Answer Explanation

The Marginal Rate of Substitution (MRS) is the rate at which a consumer is willing to sacrifice one good (mangoes) to obtain an additional unit of another good (bananas) while remaining on the same indifference curve. Since every point on an indifference curve provides equal satisfaction, the consumer substitutes one good for another without changing total utility. Therefore, the reason correctly explains why MRS measures this trade-off.

❓ Why Other Options Are Incorrect

B. Incorrect because the reason directly explains the assertion.
C. Incorrect because both the assertion and reason are true.
D. Incorrect because neither statement is false.

🎯 Strategy

Used

Application of the concept of Marginal Rate of Substitution (MRS).

🧠 Memory Trick

"MRS = Give up one good, Keep satisfaction same."

📚 Class XI Economics – Theory of Consumer Behaviour – Marginal Rate of Substitution

18 Arrange the combinations A, B, C, D to reflect the movement along an Indifference Curve demonstrating Diminishing Marginal Rate of Substitution (increasing bananas, decreasing mangoes):
1. 2 Bananas, 12 Mangoes
2. 4 Bananas, 5 Mangoes
3. 1 Banana, 15 Mangoes
4. 3 Bananas, 6 Mangoes

A 3, 1, 4, 2

B 1, 2, 3, 4

C 3, 4, 1, 2

D 2, 4, 1, 3

💡 Short Explanation

Bananas increase gradually. Mangoes decrease to maintain equal satisfaction. This reflects diminishing MRS.

✅ Correct Answer Explanation

Under the Law of Diminishing Marginal Rate of Substitution, as a consumer acquires more bananas, they are willing to sacrifice smaller and smaller quantities of mangoes for additional bananas. The correct progression along the indifference curve is: (1 Banana, 15 Mangoes) (2 Bananas, 12 Mangoes) (3 Bananas, 6 Mangoes) (4 Bananas, 5 Mangoes) Hence, the correct sequence is: 3 → 1 → 4 → 2

❓ Why Other Options Are Incorrect

B. Does not follow increasing bananas from the beginning.
C. Places combinations in an incorrect consumption sequence.
D. Begins with the highest number of bananas instead of the lowest.

🎯 Strategy

Used

Application of the Law of Diminishing Marginal Rate of Substitution.

🧠 Memory Trick

"More bananas → Fewer mangoes sacrificed."

📚 Class XI Economics – Theory of Consumer Behaviour – Diminishing Marginal Rate of Substitution

📄 Passage

"It may be mentioned that the law of Diminishing Marginal Rate of Substitution causes an indifference curve to be convex to the origin. This is the most common shape of an indifference curve. But in case of goods being perfect substitutes, the marginal rate of substitution does not diminish. It remains the same."

Based on the passage, what shape does the law of Diminishing Marginal Rate of Substitution cause the indifference curve to take?

A A straight line

B Concave to the origin

C Convex to the origin

D Intersecting the origin

💡 Short Explanation

Diminishing MRS makes the curve convex. Consumers sacrifice fewer units of one good as they obtain more of the other. This is the normal shape of an indifference curve.

✅ Correct Answer Explanation

The Law of Diminishing Marginal Rate of Substitution states that as a consumer acquires more of one good, the willingness to sacrifice the other good decreases. This changing trade-off makes the Indifference Curve convex to the origin, which is the standard shape described in NCERT.

❓ Why Other Options Are Incorrect

A. A straight line represents perfect substitutes where MRS remains constant.
B. An indifference curve is not concave under normal assumptions.
D. Indifference curves do not intersect the origin as a defining property.

🎯 Strategy

Used

Application of the relationship between MRS and the shape of the Indifference Curve.

🧠 Memory Trick

"Diminishing MRS → Convex Curve."

📚 Class XI Economics – Theory of Consumer Behaviour – Shape of Indifference Curve

📄 Passage

According to the passage, what happens to the Marginal Rate of Substitution if the goods are perfect substitutes instead of standard goods?

A It increases exponentially.

B It does not diminish; it remains the same.

C It becomes completely unpredictable.

D It drops to zero immediately.

💡 Short Explanation

Perfect substitutes are exchanged at a constant rate. MRS remains constant. The indifference curve becomes a straight line.

✅ Correct Answer Explanation

For perfect substitutes, the consumer is willing to substitute one good for another at a constant rate. Therefore, the Marginal Rate of Substitution does not diminish. As a result, the indifference curve is a straight line rather than convex to the origin.

❓ Why Other Options Are Incorrect

A. MRS does not increase exponentially.
C. The substitution rate is constant, not unpredictable.
D. MRS does not become zero; it remains constant.

🎯 Strategy

Used

Application of the concept of Perfect Substitutes.

🧠 Memory Trick

"Perfect substitutes = Constant MRS = Straight Line."

📚 Class XI Economics – Theory of Consumer Behaviour – Perfect Substitutes & Marginal Rate of Substitution

CUET UG Economics Booster Test 2 - Utility Analysis Fundamentals

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