Question : Statement 1: The concept of marginal utility becomes irrelevant when the consumer faces perfect competition.
Statement 2: In perfect competition, the consumer is a price taker and must accept the market price without considering individual preferences.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Correct Answer: Both statement 1 and statement 2 are false.
Solution : The correct answer is (d) Option D: Both statement 1 and statement 2 are false.
Statement 1 is false. The concept of marginal utility remains relevant regardless of the market structure. Marginal utility measures the additional satisfaction or benefit derived from consuming one additional unit of a good, and it is a fundamental concept in consumer theory.
Statement 2 is also false. In perfect competition, while consumers are price takers and have no individual influence on the market price, they still consider their individual preferences and utility when making consumption decisions. They are not solely driven by the market price without considering their own preferences.
Question : Assertion: The concept of marginal utility becomes irrelevant when the consumer faces perfect competition.
Reason: In perfect competition, the consumer is a price taker and must accept the market price without considering individual preferences.
Option 1: Both the assertion and reason are true, and the reason is a correct explanation of the assertion.
Option 2: Both the assertion and reason are true, but the reason is not a correct explanation of the assertion.
Option 3: The assertion is true, but the reason is false.
Option 4: The assertion is false, but the reason is true.
Question : Statement 1: The consumer achieves equilibrium when the marginal utility per dollar spent is equal for all goods.
Statement 2: At equilibrium, the consumer maximizes their total utility within the constraints of their budget.
Question : Statement 1: The concept of consumer surplus represents the additional satisfaction gained by consuming a good.
Statement 2: Consumer surplus can be calculated by finding the difference between the total utility and the marginal utility of the last unit consumed.
Question : Statement 1: Marginal utility is the additional satisfaction derived from consuming one additional unit of a good.
Statement 2: The law of diminishing marginal utility states that as a consumer consumes more of a good, the additional satisfaction derived from each additional unit decreases.
Question : Statement 1: The slope of the budget line represents the relative price of two goods.
Statement 2: The consumer achieves equilibrium when the marginal rate of substitution is equal to the relative price of the goods.
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