Question 1
Which of the following is studied under Micro Economics ?
A. Individual unit
B. Economic Aggregate
C. National Income
D. None of these
View Answer
Question 2
In which year, IDBI was restructured and separated from control of Reserve Bank of India?
A. 1972
B. 1974
C. 1976
D. 1980
View Answer
Question 3
The Rate at which the Reserve Bank of India discounts the Bills of Exchange of the commercial Banks is known as the following?
A. Base Rate
B. Repo rate
C. Reverse Repo Rate
D. Bank Rate
View Answer
Question 4
Who is known as father of the green revolution in the world?
A. Linus pauling
B. Ralph Bunche
C. Norman Borlaug
D. M.S.Swaminathan
View Answer
Question 5
Where is Global Automotive Research Centre (GARC) located?
A. Hyderabad
B. Noida
C. Chennai
D. Mumbai
View Answer
Question 6
In a competitive economy, the uncrowned king is
A. Government
B. Producer
C. Consumer
D. Seller
View Answer
Question 7
A dual system of pricing exists in
A. Capitalist economy
B. Socialist economy
C. Mixed economy
D. None of these
View Answer
Question 8
What do you mean by the supply of goods?
A. Stock available for sale
B. Total stock in the warehouse
C. The actual production of the goods
D. Quantity of the goods offered for sale at a particular price per unit of time
View Answer
Answer: D
Explaination:
Quantity of the goods offered for sale at a particular price per unit of time
Question 9
What do you mean by ‘under conditions of a perfect competition in the product market’?
A. MRP = VMP
B. MRP > VMP
C. VMP > MRP
D. None of the above
View Answer
Answer: A
Explaination:
MRP = VMP
Question 10
Which of the following is the relation that the law of demand defines?
A. Income and price of a commodity
B. Price and quantity of a commodity
C. Income and quantity demanded
D. Quantity demanded and quantity supplied
View Answer
Answer: B
Explaination:
Price and quantity of a commodity
Question 11
labourers are employed the firm produces 136 units of output. Thenthe marginal product is ___
A. 120
B. 136
C. 6
D. 16
View Answer
Question 12
Other things remaining the same, the quantity of a product demanded increases with ____________ in price.
A. Increase
B. Decrease
C. Variation
D. None of the above
View Answer
Question 13
Equilibrium in the economy is settled by _________, according to the Classicals.
A. Centralized planning
B. Price mechanism
C. Both the planning and price mechanism
D. None of these
View Answer
Question 14
Temporary unemployment is _____________, according to the Classical economists:
A. Impossible
B. Permanent
C. Possible
D. None of these
View Answer
Question 15
J.B. Say was a _______________Economist.
A. Swedish
B. German
C. French
D. Americal
View Answer
Question 16
Supply curve represents ________ relationship between quantity and price.
A. Direct
B. Inverse
C. Either direct or inverse
D. None of the above
View Answer
Question 17
Invisible item are the part of ‐‐‐‐‐‐ account of balance of payment.
A. Current
B. Capital
C. Merchandise
D. None of the above
View Answer
Question 18
The contribution of service sector to GDP in 2011‐12 is:
A. 13.90%
B. 14.50%
C. 56.30%
D. 29.10%
View Answer
Question 19
The growth rate of service sector in 2011‐12 is:
A. 3.30%
B. 9.40%
C. 10.50%
D. 6.30%
View Answer
Question 20
‐‐‐‐‐‐ is not an example of ‘near money’
A. Bill of exchange
B. Treasury bills
C. Bond
D. Currency notes
View Answer
Question 21
The capital that is consumed by an economy or a firm in the production process is known as
A. Capital loss
B. Production cost
C. Dead-weight loss
D. Depreciation
View Answer
Answer: Option D
Explanation:
The capital that is consumed by an economy or a firm in the production process is known as Depreciation. In economics, depreciation is the gradual decrease in the economic value of the capital stock of a firm, nation or other entity, either through physical depreciation, obsolescence or changes in the demand for the services of the capital in question.
Question 22
Who propounded the opportunity cost theory of international trade?
A. Ricardo
B. Marshall
C. Heckscher & Ohlin
D. Haberler
View Answer
Answer: Option D
Explanation:
Haberler propounded the opportunity cost theory of international trade. Gottfried Haberler has attempted to restate the comparative costs in terms of opportunity cost. He demonstrates that the doctrine of comparative costs can hold valid even if the labour theory of value is discarded. The theory determines the cost of producing a commodity in terms of the alternative production that has to be foregone for producing the commodity in question.
Question 23
Which among the following statement is INCORRECT?
A. On a linear demand curve, all the five forms of elasticity can be depicted
B. If two demand curves are linear and intersecting each other, then, coefficient of elasticity would be same on different demand curves at the point of intersection.
C. If two demand curves are linear and parallel to each other, then, at a particular price, the coefficient of elasticity would be different on different demand curves.
D. The price elasticity of demand is expressed in terms of relaive not absolute changes in Price and Quantity demanded.
View Answer
Answer: Option C
Explanation:
The percentage change in the quantity demanded divided by the percentage change in price is coefficient of elasticity.So two linear and parallel demand curves will have same coefficient of elasticity and the changes in price w.r.t changes in quantity demanded will be the same.
Question 24
If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to
A. Increase
B. Decrease
C. Remain the same
D. Become zero
View Answer
Answer: Option A
Explanation:
If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to increase. Raising prices will always cause total revenue to increase.
Question 25
The horizontal demand curve parallel to x-axis implies that the elasticity of demand is
A. Zero
B. Infinite
C. Equal to 1
D. Greater than zero but less than infinity
View Answer
Answer: Option B
Explanation:
The horizontal demand curve parallel to x-axis implies that the elasticity of demand is infinite.It is zero when the demand curve is parallel to the y-axis.
Question 26
An individual demand curve slopes downward to the right because of the
A. Working of the law of diminishing marginal utility
B. Substitution effect of decrease in price
C. Income effect of fall in price
D. All of the above
View Answer
Answer: Option D
Explanation:
An individual demand curve slopes downward to the right because of the Working of the law of diminishing marginal utility, Substitution effect of decrease in price and Income effect of fall in price.
Question 27
Income elasticity of demand is defined as the responsiveness of
A. Quantity demanded to a change in income
B. Quantity demanded to a change in price
C. Price to a change in income
D. Income to a change in quantity demanded
View Answer
Answer: Option A
Explanation:
Income Elasticity of Demand (YED) is defined as the responsiveness of demand when a consumer's income changes. It is defined as the ratio of the change in quantity demand over the change in income. The higher the income elasticity, the more sensitive demand for a good is to changes in income.
Answer: Option A
Explanation:
Income Elasticity of Demand (YED) is defined as the responsiveness of demand when a consumer's income changes. It is defined as the ratio of the change in quantity demand over the change in income. The higher the income elasticity, the more sensitive demand for a good is to changes in income.
Question 28
The supply of a good refers to
A. Stock available for sale
B. Total stock in the warehouse
C. Actual production of the good
D. Quantity of the good offered for sale at a particular price per unit of time
View Answer
Answer: Option D
Explanation:
The supply of a good refers to quantity of the good offered for sale at a particular price per unit of time. The term supply refers to the entire relationship between the quantity supplied and the price of a good.
Question 29
The cost of one thing in terms of the alternative given up is called
A. Real cost
B. Production cost
C. Physical cost
D. Opportunity cost
View Answer
Answer: Option D
Explanation:
The cost of one thing in terms of the alternative given up is called Opportunity cost. Opportunity cost is an economics term that refers to the value of what you have to give up in order to choose something else.
Question 30
Assume that consumer's income and the number of sellers in the market for good X both falls. Based on this information, we can conclude with certaintty that the equilibrium
A. Price will decrease
B. Price will increase
C. Quantity will decrease
D. Quantity will increase
View Answer
Answer: Option C
Explanation:
We can conclude with certaintty that the equilibrium quantity will decrease.
Question 31
The economist's objections to monopoly rest on which of the following grounds?
A. There is a transfer of income from consumers to the monopolist
B. There is welfare loss as resources tend to be misallocated under monopoly
C. Both A and B are incorrect
D. Both A and B are correct
View Answer
Answer: Option D
Explanation:
The economist's objections to monopoly rest on the following grounds that there is a transfer of income from consumers to the monopolist and there is welfare loss as resources tend to be misallocated under monopoly.
Question 32
In which of the following market structure is the degree of control over the price of its product by a firm very large?
A. Imperfect competition
B. Perfect competition
C. Monopoly
D. In A and B both
View Answer
Answer: Option C
Explanation:
In Monopoly market structure the degree of control over the price of its product by a firm very large. In a monopoly type of market structure, there is only one seller, so a single firm will control the entire market. It can set any price it wishes since it has all the market power. Consumers do not have any alternative and must pay the price set by the seller.
Question 33
The offer curves introduced by Alfred Marshall, helps us to understand how the ___ is established in international trade.
A. Terms of trade
B. Equilibrium price ratio
C. Exchange rate
D. Satisfaction level
View Answer
Answer: Option A
Explanation:
The offer curves introduced by Alfred Marshall, helps us to understand how the terms of trade is established in international trade. An offer curve shows how the volumes traded change when the terms of change.
Question 34
Demand for factors of production is
A. Derived demand
B. Joint demand
C. Composite demand
D. None of the above
View Answer
Answer: Option A
Explanation:
Demand for factors of production is derived demand. The demand for any factor of production, such as labor, physical capital or land is a derived demand because it arises not from the intrinsic utility provided by the factor but because of the value placed on the production it produces by consumers.
Question 35
The producer's demand for a factor of production is governed by the ____ of the factor.
A. Price will decrease
B. Marginal productivity
C. Availability
D. Profitability
View Answer
Answer: Option B
Explanation:
The producer's demand for a factor of production is governed by the marginal productivity of the factor.
Question 36
Under conditions of perfect competition in the product market
A. MRP = VMP
B. MRP > VMP
C. VMP > MRP
D. None of the above
View Answer
Answer: Option A
Explanation:
Under conditions of perfect competition in the product market MRP = VMP. Under the assumption of perfect competition a firm employs a factor up to that number at which the price of the factor is just equal to the value of the marginal product (=MRP of the factor).
Question 37
Which statistical measure helps in measuring the purchasing power of money?
A. Arithmetic average
B. Index numbers
C. Harmonic mean
D. Time series
View Answer
Answer: Option B
Explanation:
Index numbers statistical measure helps in measuring the purchasing power of money. Index numbers possess much practical importance in measuring changes in the cost of living, production trends, trade, income variations, etc.
Question 38
Fisher's ideal index number is
A. Arithmetic mean of Laspeyre's and Paasche's index
B. Harmonic mean of Laspeyre's and Paasche's index
C. Geometric mean of Laspeyre's and Paasche's index
D. None of the above
View Answer
Answer: Option C
Explanation:
Fisher's Ideal volume index is the geometric mean of the Laspeyres and Paasche volume indices. A measure of change in volume from period to period. It is calculated as the geometric mean of a chain Paasche volume index and a chain Laspeyres volume index.
Question 39
Which among the following statement is INCORRECT?
A. Floating exchange rate system works on the market mechanism
B. Floating exchange rate breeds uncertainties and speculation
C. Economic and political factors and value judgement influence the choice of the exchange rate system
D. The system of floating exchange rate requires comprehensive government intervention
View Answer
Answer: Option D
Explanation:
A floating exchange rate is one that is determined by supply and demand on the open market. A floating exchange rate doesn't mean countries don't try to intervene and manipulate their currency's price, since governments and central banks regularly attempt to keep their currency price favorable for international trade.
Question 40
Which among the following statement is INCORRECT?
A. Welfare economics is based on value judgements
B. Welfare economics is also called 'economics with a heart'
C. Welfare economics focuses on questions about equity as well as efficiency
D. The founder of Welfare economics was Alfred Marshall
View Answer
Answer: Option D
Explanation:
Arthur Cecil Pigou succeeded Prof. Marshall as the Professor of Economics at the University of Cambridge. After Marshall, he became the leading neo classical economist. He is the founder of “Welfare Economics” His leading ideas on welfare economics are found in his “Economics of Welfare” (1920).
Question 41
Who is the 'lender of the last resort' in the banking structure of India?
A. State bank of India
B. Reserve bank of India
C. EXIM bank of India
D. Union bank of India
View Answer
Answer: Option B
Explanation:
Reserve bank of India is the 'lender of the last resort' in the banking structure of India. A lender of last resort is an institution, usually a country's central bank, that offers loans to banks or other eligible institutions that are experiencing financial difficulty or are considered highly risky or near collapse.
Question 42
____ is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved bills held by the commercial banks
A. Repo rate
B. Bank rate
C. Prime lending rate
D. Reverse repo rate
View Answer
Answer: Option B
Explanation:
Bank rate is the official minimum rate at which the Central Bank of a country is prepared to rediscount approved bills held by the commercial banks.
Question 43
In order to control credit, Reserve Bank of India should
A. Increase CRR and decrease Bank rate
B. Decrease CRR and reduce Bank rate
C. Increase CRR and increase Bank rate
D. Reduce CRR and increase Bank rate
View Answer
Answer: Option C
Explanation:
In order to control credit, Reserve Bank of India should Increase CRR and increase Bank rate. During high inflation in the economy, RBI raises the CRR to lower the bank's loanable funds.
Question 44
Which among the following is a function of the Reserve Bank of India?
A. Bank issues the letters of credit to their customers certifying their credibility
B. Collecting and compilation of statistical information relating to banking & other financial sector
C. Banks underwrite the securities issued by public or private organizations
D. Accepting deposits from the public
View Answer
Answer: Option B
Explanation:
Collecting and compilation of statistical information relating to banking & other financial sector is a function of the Reserve Bank of India.
Question 45
Credit creation power of the commercial banks gets limited by which of the following?
A. Banking habits of the people
B. Cash Reserve Ratio
C. Credit policy of the central bank
D. All of the above
View Answer
Answer: Option D
Explanation:
Credit creation power of the commercial banks gets limited by Banking habits of the people, Cash Reserve Ratio and Credit policy of the central bank.
Question 46
Number of times a unit of money changes hands in the course of a year is called
A. Supply of money
B. Purchasing power of money
C. Velocity of money
D. Value of money
View Answer
Answer: Option C
Explanation:
Number of times a unit of money changes hands in the course of a year is called Velocity of money. The velocity of money is the number of times a unit of money changes hands during exchanges in a year.
Question 47
What is meant by Autarky in international trade?
A. Monopoly in international trade
B. Imposition of restrictions in international trade
C. Removal of all restrictions from international trade
D. The idea of self sufficiency and no international trade by a country
View Answer
Answer: Option D
Explanation:
Autarky in international trade means the idea of self sufficiency and no international trade by a country. A country is said to be in a complete state of autarky if it has a closed economy, which means that it does not engage in international trade with any other country.
Question 48
Elasticity of supply refers to the degree of responsiveness of supply of a commodity to changes in its
A. Demand
B. Price
C. Cost of production
D. State of technology
View Answer
Answer: Option B
Explanation:
Elasticity of supply refers to the degree of responsiveness of supply of a commodity to changes in its Price. Elasticity of supply measures the degree of responsiveness of quantity supplied to a change in own price of the commodity. It is also defined as the percentage change in quantity supplied divided by percentage change in price.
Question 49
When demand is perfectly inelastic, an increase in price will result in
A. A decrease in total revenue
B. An increase in total revenue
C. No change in total revenue
D. A decrease in quantity demanded
View Answer
Answer: Option B
Explanation:
When demand is perfectly inelastic, an increase in price will result in an increase in total revenue.
Question 50
The cost on one thing in terms of the alternative given up is known as
A. Production cost
B. Physical cost
C. Real cost
D. Opportunity cost
View Answer
Answer: Option D
Explanation:
The cost on one thing in terms of the alternative given up is known as Opportunity cost. Opportunity cost is an economics term that refers to the value of what you have to give up in order to choose something else.
Question 51
When equilibrium price rises but equilibrium quantity remains unchanged, the cause is
A. Supply and demand both increase equally
B. Supply and demand both decrease equally
C. Supply decreases and demand increases
D. Supply increases and demand decreases
View Answer
Answer: Option C
Explanation:
When equilibrium price rises but equilibrium quantity remains unchanged, the cause is supply decreases and demand increases. As price increases, it serves as an incentive for suppliers to increase supply and also leads to a fall in demand. It is important to realize that these processes continue to operate until a new equilibrium is established.
Question 52
If demand is unitary elastic, a 25% increase in price will result in
A. 25% change in total revenue
B. No change in quantity demanded
C. 1% decrease in quantity demanded
D. 25% decrease in quantity demanded
View Answer
Answer: Option D
Explanation:
If demand is unitary elastic, a 25% increase in price will result in 25% decrease in quantity demanded.
Question 53
Contraction of demand is the result of
A. Decrease in the number of consumers
B. Increase in the price of the commodity concerned
C. Increase in the prices of other goods
D. Decrease in the income of purchasers
View Answer
Answer: Option B
Explanation:
Contraction of demand is the result of Increase in the price of the commodity concerned. The demand for a commodity changes due to a change in price. It is called extension and contraction of demand. When there is decrease in price of commodity there is in increase in demand of that commodity.
Question 54
Normally a demand curve will have the shape
A. Horizontal
B. Vertical
C. Downward sloping
D. Upward sloping
View Answer
Answer: Option C
Explanation:
Normally a demand curve will have downward sloping shape. The demand curve is downward sloping, indicating the negative relationship between the price of a product and the quantity demanded.
Question 55
According to M. Kalecki, the true measure of the degree of monopoly power is the
A. Ratio between price and marginal cost
B. Extent of monopolistic profit enjoyed by the monopolist
C. Cross-elasticity of demand for the product of the monopolist
D. Price charged by the monopolist minus marginal cost of production
View Answer
Answer: Option A
Explanation:
According to M. Kalecki, the true measure of the degree of monopoly power is the Ratio between price and marginal cost. Monopoly is the form of market organisation in which there is a single fir m selling a commodity for which there are no close substitutes.
Question 56
Who defined Economics as a 'science which studies human behaviour as a relationship betweeen ends and means which have alternative uses'?
A. L. Robbins
B. Alfred Marshall
C. Joan Robinson
D. Paul A. Samuelson
View Answer
Answer: Option A
Explanation:
L. Robbins defined economics: "Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses."
Question 57
Law of demand shows relation between
A. Income and price of commodity
B. Price and quantity of commodity
C. Income and quantity demanded
D. Quantity demanded and quantity supplied
View Answer
Answer: Option B
Explanation:
Law of demand shows relation between Price and quantity of commodity. Quantity demanded of a commodity is inversely related to the price of the commodity.
Question 58
Price of a product is determined in a free market by
A. Demand for the product
B. Supply of the product
C. Both demand and supply
D. The government
View Answer
Answer: Option C
Explanation:
Price of a product is determined in a free market by both demand and supply. In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded (at the current price) will equal the quantity supplied (at the current price), resulting in an economic equilibrium for price and quantity transacted.
Question 59
A mixed economy is characterized by the co-existence of
A. Modern and traditional industries
B. Public and private sectors
C. Foreign and domestic investments
D. Commercial and subsistence farming
View Answer
Answer: Option B
Explanation:
A mixed economy is characterized by the co-existence of Public and private sectors. Mixed economies, with state-supervised markets, are most related to fascism (in the economic sense) and have several common features.
Question 60
Which of the following is NOT a feature of iso-product curve? Iso-product curves
A. Are downward sloping to the right
B. Show different input combination producing the same output
C. Intersect each other
D. Are convex to the origin
View Answer
Answer: Option C
Explanation:
Iso-product curves doesnot intersect each other.
Question 61
When cross elasticity of demand is a large positive number, one can conclude that
A. The good is normal
B. The good is inferior
C. The good is a substitute
D. The good is complement
View Answer
Answer: Option C
Explanation:
When cross elasticity of demand is a large positive number, one can conclude that the good is complement. Two goods that complement each other have a negative cross elasticity of demand: as the price of good Y rises, the demand for good X falls.
Question 62
This is an assumption of law of demand
A. Price of the commodity should not change
B. Quantity should not change
C. Supply should not change
D. Income of consumer should not change
View Answer
Answer: Option D
Explanation:
The law of demand is based on the following assumption or conditions:No change in consumer's income: Consumer's income must remain unchanged because if income increases consumer may buy more even at a higher price invalidating the law of demand.No change in the size and composition of population: The size of population, gender ratio and age composition are assumed to remain constant. As such changes are sure to affect demand.No change in consumer's taste, preference, habits and fashions: If the taste changes then the consumer's preference also will change which will affect demand. When commodities go out of fashion then demand will be low even at a low price.No expectation of future price change: The consumers do not expect any significant rise or fall in the future prices.No change in prices of related goods: The law assumes that prices of substitutes and complementary goods remain constant.No change in tax policy of the Government: The level of direct and indirect tax imposed by the government on the income and goods should remain constant.
Question 63
All but one of the following are assumed to remain the same while drawing an individual's demand curve for a commodity. Which one is it?
A. The preferences of the individual
B. His monetary income
C. The price of the commodity under consideration
D. The prices of other goods
View Answer
Answer: Option C
Explanation:
Only price changes and all others like price of related goods, income, taste and preference remain constant, while drawing an individual's Demand curve for a commodity.
Question 64
Microeconomics deals with the
A. Allocation of resources of the economy as between production of different goods and services
B. Determination of prices of goods and services
C. Behavior of industrial decision makers
D. All of the above
View Answer
Answer: Option D
Explanation:
Microeconomics deals with the Allocation of resources of the economy as between production of different goods and services, Determination of prices of goods and services and Behavior of industrial decision makers.
Question 65
Some economists refer to iso-product curves as
A. Engels curve
B. Production indifference curve
C. Budget line
D. Ridge line
View Answer
Answer: Option B
Explanation:
Some economists refer to iso-product curves as Production indifference curve. A given quantity of output may be produced with different combinations of factors. Iso-quant curves are also known as Equal-product or Iso-product or Production Indifference curves.
Question 66
Which of the following is not an essential condition of pure competition?
A. Large number of buyers and sellers
B. Homogeneous product
C. Freedom of entry
D. Absence of transport cost
View Answer
Answer: Option D
Explanation:
Absence of transport cost is not an essential condition of pure competition. If the two conditions of pure competition are fulfilled, there can be no question of monopolistic control. In perfect competition, apart from the absence of monopoly, some other conditions are also essential, e.g., free entry and exit, the absence of transport cost, perfect knowledge.
Question 67
According to Joseph Schumpeter, profit is the reward for
A. Innovation
B. Uncertainty-bearing
C. Risk-taking
D. Management
View Answer
Answer: Option A
Explanation:
According to Joseph Schumpeter, profit is the reward for Innovation. He believed that an entrepreneur can earn economic profits by introducing successful innovations.
Question 68
In market equilibrium, supply is vertical line. The downward sloping demand curve shifts to the right. Then
A. Price will fall
B. Price remains same
C. Price will rise
D. Quantity rises
View Answer
Answer: Option C
Explanation:
In market equilibrium, supply is vertical line. The downward sloping demand curve shifts to the right, then Price will rise.
Question 69
If quantity demanded is completely unresponsive to changes in price, demand is
A. Inelastic
B. Unit elastic
C. Elastic
D. Perfectly inelastic
View Answer
Answer: Option D
Explanation:
If quantity demanded is completely unresponsive to changes in price, demand is Perfectly inelastic. Perfectly inelastic demand means that quantity demanded remains the same when price increases or decreases. Consumers are completely unresponsive to changes in price.
Question 70
Which of the following is Microeconomics concerned with?
A. The size of national output
B. The level of employment
C. Changes in general level of prices
D. None of the above
View Answer
Answer: Option D
Explanation:
Microeconomics is primarily concerned with the factors that affect individual economic choices, the effect of changes in these factors on the individual decision makers, how their choices are coordinated by markets, and how prices and demand are determined in individual markets.
Question 71
Which of the following is also known as plant curves?
A. Long-run average cost (LAC) curves
B. Short-run average cost (SAC) curves
C. Average variable cost (AVC) curves
D. Average total cost (ATC) curves
View Answer
Answer: Option B
Explanation:
Short-run average cost (SAC) curves is also known as plant curves. These SACs are also called plant curves. In the short run, a firm can operate on any SAC, given the size of the plant.
Question 72
Other things equal, if a good has more substitutes, its price elasticity of demand is
A. Larger
B. Smaller
C. Zero
D. Unity
View Answer
Answer: Option A
Explanation:
Other things equal, if a good has more substitutes, its price elasticity of demand is larger.
Question 73
If demand is inelastic, a change in the price
A. Will change the quantity in same direction
B. Will change total revenue in same direction
C. Will change total revenue in the opposite direction
D. Will not change total revenue
View Answer
Answer: Option B
Explanation:
If demand is inelastic, a change in the price will change total revenue in same direction. When demand is price inelastic, a given percentage change in price results in a smaller percentage change in quantity demanded. That implies that total revenue will move in the direction of the price change: an increase in price will increase total revenue, and a reduction in price will reduce it.
Question 74
An economic theory is
A. An axiom
B. A proposition
C. A hypothesis
D. A tested hypothesis
View Answer
Answer: Option D
Explanation:
An economic theory is a tested hypothesis. Hypothesis testing is an act in statistics whereby an analyst tests an assumption regarding a population parameter. The methodology employed by the analyst depends on the nature of the data used and the reason for the analysis. Hypothesis testing is used to infer the result of a hypothesis performed on sample data from a larger population.
Question 75
What is the shape of the average fixed cost (AFC) curve?
A. U-shape
B. Horizontal up to a point and then rising
C. Sloping down towards the right
D. Rectangular hyperbola
View Answer
Answer: Option D
Explanation:
Rectangular hyperbola is the shape of the average fixed cost (AFC) curve. The AFC curve is a rectangular hyperbola in the sense that all rectangles formed by AFC are of equal sizes.
Question 76
Which one of the following pairs of commodities is an example of substitutes?
A. Tea and sugar
B. Tea and coffee
C. Pen and ink
D. Shirt and trousers
View Answer
Answer: Option B
Explanation:
Tea and coffee pairs of commodities is an example of substitutes. This is a negative relationship, as is true for all pairs of goods that are complements.
Question 77
A decrease in demand causes the equilibrium price to
A. Rise
B. Fall
C. Remain constant
D. Indeterminate
View Answer
Answer: Option B
Explanation:
A decrease in demand causes the equilibrium price to Fall. A decrease in demand and an increase in supply will cause a fall in equilibrium price, but the effect on equilibrium quantity cannot be determined.
Question 78
Price of a product falls by 10% and its demand rises by 30%. The elasticity of demand is
A. 10%
B. 30%
C. 3
D. 1
View Answer
Answer: Option C
Explanation:
Price of a product falls by 10% and its demand rises by 30%. The elasticity of demand is 3.
Question 79
Which one is the assumption of law of demand
A. Price of the commodity should not change
B. Quantity demanded should not change
C. Prices of substitutes should not change
D. Demand curve must be linear
View Answer
Answer: Option C
Explanation:
Prices of substitutes should not change is the assumption of law of demand. For example if the price of Coke is decreased then it will lead to fall in the demand for Pepsi even when the price of Pepsi has remain constant as Pepsi is close substitute of Coke, in the same way if the price of Coke is increased than it will lead to rise in demand for Pepsi.
Question 80
Identify the aspect of taxation which is related to normative economics
A. Incidence of tax
B. Effect of tax on the capacity willingness to work
C. Equity of tax
D. None of the above
View Answer
Answer: Option C
Explanation:
The aspect of taxation which is related to normative economics is Equity of tax.
Question 81
If elasticity of demand is very low, it shows that the commodity is
A. A necessity
B. A luxury
C. Has little importance in total budget
D. a' and 'c' above
View Answer
Answer: Option D
Explanation:
If elasticity of demand is very low, it shows that the commodity is necessity and has little importance in total budget.
Question 82
What is the shape of the demand curve faced by a firm under perfect competition?
A. Horizontal
B. Vertical
C. Positively sloped
D. Negatively sloped
View Answer
Answer: Option A
Explanation:
The shape of the demand curve faced by a firm under perfect competition is Horizontal. The demand curve faced by a firm in a perfectly competitive market is infinitely elastic. Graphically, this means that it is a horizontal line at the market price.
Question 83
An increase in the supply of a commodity is caused by
A. Improvements in technology
B. Fall in the prices of other commodities
C. Fall in the prices of factors of production
D. All of the above
View Answer
Answer: Option D
Explanation:
An increase in the supply of a commodity is caused by Improvements in technology, Fall in the prices of other commodities and Fall in the prices of factors of production.
Question 84
When price is below equilibrium level, there will be
A. Surplus commodity in the market
B. Shortage of commodity in the market
C. Supply curve will shift
D. Demand curve will shift
View Answer
Answer: Option B
Explanation:
When price is below equilibrium level, there will be Shortage of commodity in the market.
Question 85
The following are causes of shift in demand EXCEPT
A. Change in income
B. Change in price
C. Change in fashion
D. Change in prices of substitutes
View Answer
Answer: Option B
Explanation:
The following are causes of shift in demand except Change in price. A shift in the demand curve is when a determinant of demand, other than price, changes. A shift to the left means demand drops, and vice-versa.
Question 86
Ten rupees is the equilibrium price for good X. If government fixes the price at Rs.5, there is
A. A shortage
B. A surplus
C. Excess supply
D. Loss
View Answer
Answer: Option A
Explanation:
Ten rupees is the equilibrium price for good X. If government fixes the price at Rs.5, there is a shortage.
Question 87
Demand for a commodity refers to a
A. Desire for the commodity
B. Need for the commodity
C. Quantity demanded of that commodity
D. Quantity of the commodity demanded at a certain price during any particular period of time
View Answer
Answer: Option D
Explanation:
Demand for a commodity refers to a quantity of the commodity demanded at a certain price during any particular period of time.
Question 88
A rise in supply and demand in equal proportion will result in
A. Increase in equilibrium price and equilibrium quantity
B. Decrease in equilibrium price and increase in equilibrium quantity
C. No change in equilibrium price and increase in equilibrium quantity
D. Increase in equilibrium price and no change in equilibrium quantity
View Answer
Answer: Option C
Explanation:
A rise in supply and demand in equal proportion will result in no change in equilibrium price and increase in equilibrium quantity.
Question 89
Zubair has a special taste for college canteen's hotdogs. The owner of the canteen doubles the prices of hotdogs. Zubair did not respond to the increase in prices and kept on demanding the same quantity of hotdogs. His demand for hotdogs is
A. Perfectly elastic
B. Perfectly inelastic
C. Elastic
D. Less elastic
View Answer
Answer: Option B
Explanation:
Zubair has a special taste for college canteen's hotdogs. The owner of the canteen doubles the prices of hotdogs. Zubair did not respond to the increase in prices and kept on demanding the same quantity of hotdogs. His demand for hotdogs is perfectly inelastic.
Question 90
Mr. Raees Ahamd bought 50 litres of petrol when his monthly income was Rs.25000. Now his monthly income has risen to Rs.50,000 and he purchases 100 litres of petrol. His income elasticity of demand for petrol is
A. 1
B. 100%
C. Less than 1
D. More than 1
View Answer
Answer: Option A
Explanation:
Mr. Raees Ahamd bought 50 litres of petrol when his monthly income was Rs.25000. Now his monthly income has risen to Rs.50,000 and he purchases 100 litres of petrol. His income elasticity of demand for petrol is 1.
Question 91
Total utility is maximum when
A. Marginal utility is zero
B. Marginal utility is at its highest point
C. Marginal utility is equal to average
D. Average utility is maximum
View Answer
Answer: Option A
Explanation:
Total utility is maximum when Marginal utility is zero. It is based in the law of diminishing marginal utility which says 'as more and more units of a good are consumed, MU i.e level of satisfaction derived from each successive unit goes on falling because desire for that commodity tend to fall.
Question 92
In the case of a straight-line demand curve meeting the two axes, the price-elasticity of demand at the mid-point of the line would be
A. 0
B. 1
C. 1.5
D. 2
View Answer
Answer: Option B
Explanation:
In the case of a straight-line demand curve meeting the two axes, the price-elasticity of demand at the mid-point of the line would be 1.
Question 93
Under which of the following forms of market structure does a firm have no control over the price of its product?
A. Monopoly
B. Monopolistic competition
C. Oligopoly
D. Perfect competition
View Answer
Answer: Option D
Explanation:
Under Perfect competition forms of market structure does a firm have no control over the price of its product. All goods in a perfectly competitive market are considered perfect substitutes, and the demand curve is perfectly elastic for each of the small, individual firms that participate in the market. These firms are price takers–if one firm tries to raise its price, there would be no demand for that firm's product
Question 94
Which is a condition for existence of monopoly?
A. Big size
B. Identical product
C. Absence of government taxes
D. No close substitute
View Answer
Answer: Option D
Explanation:
No close substitute is a condition for existence of monopoly. If a close substitute exists, then the monopoly cannot exist. Remember, a monopoly can only exist when the cross-elasticity of the product that the monopolist produces is zero.
Question 95
Which is the first-order condition for the profit of a firm to be maximum?
A. AC=MR
B. MC=MR
C. MR=AR
D. AC=AR
View Answer
Answer: Option B
Explanation:
MC=MR is the first-order condition for the profit of a firm to be maximum. The Profit Maximization Rule states that if a firm chooses to maximize its profits, it must choose that level of output where Marginal Cost (MC) is equal to Marginal Revenue (MR) and the Marginal Cost curve is rising. In other words, it must produce at a level where MC = MR.
Question 96
When price elasticity of demand for normal goods is calculated, the value is always
A. Positive
B. Negative
C. Constant
D. Greater than 1
View Answer
Answer: Option B
Explanation:
When price elasticity of demand for normal goods is calculated, the value is always Negative. The PED is the percentage change in quantity demanded in response to a one percent change in price. The PED coefficient is usually negative, although economists often ignore the sign. Demand for a good is relatively inelastic if the PED coefficient is less than one (in absolute value).
Question 97
If the demand for a commodity is inelastic, an increase in its pice will cause the total expenditure of the consumers of the commodity to
A. Remain the same
B. Increase
C. Decrease
D. Any of the above
View Answer
Answer: Option B
Explanation:
If the demand for a commodity is inelastic, an increase in its pice will cause the total expenditure of the consumers of the commodity to Increase. When demand is inelastic, a fall in the price of a commodity leads to fall in total expenditure on it. On the other hand, when price increases, total expenditure also increases.
Question 98
Which of the following is one of the assumptions of perfect competition?
A. Few buyers and few sellers
B. Many buyers and few sellers
C. Many buyers and many sellers
D. All sellers and buyers are honest
View Answer
Answer: Option C
Explanation:
Many buyers and many sellers is one of the assumptions of perfect competition. Yes, in a perfectly competitive market, there are many buyers and many sellers. As a consequence, they have no market power and cannot influence the market price. This is an assumption of the model of perfect competition.
Question 99
Which one of the following is the condition of equilibrium for the monopolist?
A. MR=MC
B. MC=AR
C. MR=MC=Price
D. AC=AR
View Answer
Answer: Option A
Explanation:
MR=MC is the condition of equilibrium for the monopolist. The conditions for Equilibrium in Monopoly are the same as those under perfect competition. The marginal cost (MC) is equal to the marginal revenue (MR).
Question 100
In case of monopoly
A. Marginal revenue curve always slopes upward
B. Total revenue curve always slopes upward
C. Marginal revenue is always equal to average revenue
D. Marginal revenue is always less than average revenue
View Answer
Answer: Option D
Explanation:
In case of monopoly, Marginal revenue is always less than average revenue. A monopolist's marginal revenue is always less than or equal to the price of the good. Marginal revenue is the amount of revenue the firm receives for each additional unit of output.
Question 101
Price and demand are positively correlated in case of
A. Normal goods
B. Comforts
C. Giffen goods
D. Luxuries
View Answer
Answer: Option C
Explanation:
Price and demand are positively correlated in case of Giffen goods. A Giffen good is a product for which demand increases as the price increases and falls when the price decreases.
Question 102
If regardless of changes in its price, the quantity demanded of a commodity remains unchanged, then the demand curve for the commodity will be
A. Horizontal
B. Vertical
C. Positively sloped
D. Negatively sloped
View Answer
Answer: Option B
Explanation:
If regardless of changes in its price, the quantity demanded of a commodity remains unchanged, then the demand curve for the commodity will be Vertical.
Question 103
The situation of monopolistic competition is created by
A. Small number of producers of a commodity
B. Lack of homogeneity of the product produced by different firms
C. Imperfection of the market for that product
D. All of the above
View Answer
Answer: Option D
Explanation:
The situation of monopolistic competition is created by Small number of producers of a commodity, Lack of homogeneity of the product produced by different firms and Imperfection of the market for that product.
Question 104
Identify the coefficient of price-elasticity of demand when the percentage increase in the quantity of a commodity demanded is smaller than the percentage fall in its price
A. Equal to one
B. Greater than one
C. Small than one
D. Zero
View Answer
Answer: Option C
Explanation:
The coefficient of price-elasticity of demand is smaller than one when the percentage increase in the quantity of a commodity demanded is smaller than the percentage fall in its price.
Question 105
In case of perfect competition in the market
A. Marginal revenue curve always slopes upward
B. Marginal revenue curve always slopes downwards
C. Marginal revenue is always equal to average revenue
D. Marginal revenue is always less than average revenue
View Answer
Answer: Option C
Explanation:
In case of perfect competition in the market marginal revenue is always equal to average revenue. They coincide because marginal revenue is equal to average revenue at every output quantity. The equality between marginal revenue and average revenue is the result of perfect competition.
Question 106
Demand is a function of
A. Price
B. Quantity
C. Supply
D. None of the above
View Answer
Answer: Option A
Explanation:
Demand is a function of Price. An increase in the price of the commodity decrease the demand for that commodity, while the decrease in price increases its demand.
Question 107
In which form of the market structure is the degree of control over the price of its product by a firm very large?
A. Monopoly
B. Imperfect condition
C. Oligopoly
D. Perfect competition
View Answer
Answer: Option A
Explanation:
In Monopoly market structure the degree of control over the price of its product by a firm very large. In a monopoly type of market structure, there is only one seller, so a single firm will control the entire market. It can set any price it wishes since it has all the market power.
Question 108
The budget line is also known as the
A. Iso-utility curve
B. Production possibility line
C. Isoquant
D. Consumption possibility line
View Answer
Answer: Option D
Explanation:
The budget line is also known as the Consumption possibility line. The CPF, or consumption–possibility frontier, is the budget constraint where participants in international trade can consume.
Question 109
Discriminating monopoly implies that the monopolist charges different prices for its commodity
A. From different groups of consumers
B. For different uses
C. At different places
D. Any of the above
View Answer
Answer: Option D
Explanation:
Discriminating monopoly implies that the monopolist charges different prices for its commodity From different groups of consumers, for different uses and at different places.
Question 110
The major difference between perfect competition and monopolistic competition is
A. Number of firms
B. Differentiated product
C. Rate of profit
D. Free exit and entry
View Answer
Answer: Option B
Explanation:
The major difference between perfect competition and monopolistic competition is differentiated product. Product differentiation (or simply differentiation) is the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors' products as well as a firm's own products.
Question 111
A firm under perfect competition is
A. Price maker
B. Price breaker
C. Price taker
D. Price shaker
View Answer
Answer: Option C
Explanation:
A firm under perfect competition is Price taker. In perfect market conditions (also called perfect competition) a firm is a price taker because other firms can enter the market easily and produce a product that is indistinguishable from every other firm's product. This makes it impossible for any firm to set its own prices.
Question 112
If price and total revenue move in the same direction, then demand is
A. Inelastic
B. Elastic
C. Unrelated
D. Perfectly elastic
View Answer
Answer: Option A
Explanation:
If price and total revenue move in the same direction, then demand is Inelastic. If you decrease the good's price, a large increase occurs in quantity demanded, and total revenue increases.
Question 113
The elasticity of demand of durable goods is
A. Less than unity
B. Greater than unity
C. Equal to unity
D. Zero
View Answer
Answer: Option B
Explanation:
The elasticity of demand of durable goods is greater than unity. Price elasticity of demand for durable goods is generally more elastic in short run than in long run. That is, quantity demanded is more sensitive to price changes of such durable goods in short run and not so much in the long run.
Question 114
Which one is not a assumption of the theory of demand based on analysis of indifference curves?
A. Given scale of preferences as between different combinations of two goods
B. Diminishing marginal rate of substitution
C. Constant marginal utility of money
D. Consumers would always prefer more of a particular good to less of it, other things remaining the same
View Answer
Answer: Option C
Explanation:
Constant marginal utility of money is not a assumption of the theory of demand based on analysis of indifference curves. An indifference curve is a graph that shows a combination of two goods that give a consumer equal satisfaction and utility, thereby making the consumer indifferent.
Question 115
In the case of an inferior good, the income elasticity of demand is
A. Positive
B. Zero
C. Negative
D. Infinite
View Answer
Answer: Option C
Explanation:
In the case of an inferior good, the income elasticity of demand is Negative. A negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a fall in the demand and may lead to changes to more luxurious substitutes.
Question 116
Price discrimination will be profitable only if the elasticity of demand in different markets into which the total market has been divided is
A. Uniform
B. Different
C. Less
D. Zero
View Answer
Answer: Option B
Explanation:
Price discrimination will be profitable only if the elasticity of demand in different markets into which the total market has been divided is different.
Question 117
Which is the other name that is given to the average revenue curve?
A. Profit curve
B. Demand curve
C. Average cost curve
D. Indifference curve
View Answer
Answer: Option B
Explanation:
Demand curve is the other name that is given to the average revenue curve. Average revenue curve is often called the demand curve due to its representation of the product's demand in the market.
Question 118
Marginal revenue is always less than price at all levels of output in
A. Perfect competition
B. Monopoly
C. Both 'a' and 'b'
D. None of the above
View Answer
Answer: Option B
Explanation:
Marginal revenue is always less than price at all levels of output in Monopoly. A monopolist's marginal revenue is always less than or equal to the price of the good. Marginal revenue is the amount of revenue the firm receives for each additional unit of output.
Question 119
Which of the following markets comes closest to perfect market?
A. Wheat market
B. Cigarette market
C. Cold drinks market
D. Stock market
View Answer
Answer: Option A
Explanation:
Wheat market comes closest to perfect market. A perfectly competitive firm is called a price taker, because the pressure of competing firms forces them to accept the prevailing equilibrium price in the market. When a wheat grower wants to know what the going price of wheat is, he or she has to go to the computer or listen to the radio to check.
Question 120
What does price elasticity of demand measure?
A. Change in price caused by changes in demand
B. The rate of change of sales
C. The responsiveness of demand to price changes
D. The value of sales at a given price
View Answer
Answer: Option C
Explanation:
The price elasticity of demand measures the responsiveness of the quantity demanded to changes in the price. Demand is inelastic if it does not respond much to price changes, and elastic if demand changes a lot when the price changes. Necessities tend to have inelastic demand.
Question 121
The elasticity of substitution between two perfect substitutions is
A. Zero
B. Greater than zero
C. Less than infinity
D. Infinity
View Answer
Answer: Option D
Explanation:
The elasticity of substitution between two perfect substitutions is Infinity. Elasticity of factor substitution can take any value from zero to infinity, always being positive.
Question 122
In monopoly and perfect competition, the cost curves are
A. Same
B. Different
C. Opposite
D. None of the above
View Answer
Answer: Option A
Explanation:
In monopoly and perfect competition, the cost curves are same. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. Perfect competition produces an equilibrium in which the price and quantity of a good is economically efficient.
Question 123
Which of the following is NOT a characteristic of perfect competition?
A. Free entry and exit of the firms
B. The demand curve of firm is horizontal
C. The marginal revenue curve is horizontal
D. An individual firm can influence the price
View Answer
Answer: Option D
Explanation:
An individual firm can influence the price is not a characteristic of perfect competition. All goods in a perfectly competitive market are considered perfect substitutes, and the demand curve is perfectly elastic for each of the small, individual firms that participate in the market. These firms are price takers–if one firm tries to raise its price, there would be no demand for that firm's product.
Question 124
If price changes by 1% and supply changes by 2%, then supply is
A. Elastic
B. Inelastic
C. Indeterminate
D. Static
View Answer
Answer: Option A
Explanation:
If price changes by 1% and supply changes by 2%, then supply is Elastic. The Price Elasticity of Supply (PES) for elastic and inelastic supply would be different. The PES for elastic supply would be greater than 1. This tells us that if prices were to increase (or decrease) by 1%, the quantity supplied would increase (or decrease) in a number greater than 1%.
Question 125
When marginal revenue is zero, total revenue is
A. Maximum
B. Minimum
C. Zero
D. Decreasing
View Answer
Answer: Option A
Explanation:
When marginal revenue is zero, total revenue is Maximum. The profit maximizing quantity and price can be determined by setting marginal revenue equal to zero, which occurs at the maximal level of output. Marginal revenue equals zero when the total revenue curve has reached its maximum value.
Question 126
An ISO-product slopes
A. Downward to the left
B. Downward to the right
C. Upward to the left
D. Upward to the right
View Answer
Answer: Option B
Explanation:
An ISO-product slopes downward to the right. They slope downward because MTRS of labour for capital diminishes. When we increase labour, we have to decrease capital to produce a given level of output.
Question 127
Which one is increasing function of price?
A. Demand
B. Utility
C. Supply
D. Consumption
View Answer
Answer: Option C
Explanation:
Supply is increasing function of price. The higher the price of a good, the more a firm is willing to produce and offer, hence, the supply function is upward sloping. In fact, in the perfect competition market, the supply curve is the marginal cost curve. Increasing production is only profitable if the good can be sold at a higher price.
Question 128
Which of the following is NOT the assumption of the Marginal Productivity Theory of Distribution?
A. Homogenity of a factor
B. Perfect competition in the factor market
C. All factors, except one, are variable
D. Given stock of each factor and full employment
View Answer
Answer: Option C
Explanation:
All factors, except one, are variable is NOT the assumption of the Marginal Productivity Theory of Distribution.
Question 129
The consumer is in equilibrium at a point where the budget line
A. Is above an indifference curve
B. Is below an indifference curve
C. Is tangent to an indifference curve
D. Cuts an indifference curve
View Answer
Answer: Option C
Explanation:
The consumer is in equilibrium at a point where the budget line is tangent to an indifference curve. It means that marginal substitution rate between X and Y (MRSXY) should be diminishing.
Question 130
Normal profit is called normal because
A. It is neither very high nor very low
B. It is minimum acceptable to the producer
C. It is minimum which buyer wants to pay
D. It is the maximum allowed by government
View Answer
Answer: Option B
Explanation:
Normal profit is called normal because It is minimum acceptable to the producer. Normal profit is a situation where a firm makes sufficient revenue to cover its total costs and remain competitive in an industry.
Question 131
Which of the following oligopoly models is concerned with the maximization of joint profits?
A. Price leadership model
B. Bertrand's model
C. Collusive model
D. Edgeworth's model
View Answer
Answer: Option C
Explanation:
Collusive models is concerned with the maximization of joint profits. Firms join together and work for the joint profit maximization.
Question 132
Supply curve is
A. Vertical in long run
B. Flatter in long run
C. Same in long and short run
D. Horizontal in both short and long run
View Answer
Answer: Option B
Explanation:
Supply curve is Flatter in long run. All firms have identical cost conditions. Hence, in the case of a constant cost industry, the long-run supply curve LSC is a horizontal straight line (i.e., perfectly elastic) at the price OP, which is equal to the minimum average cost. This means that whatever the output supplied, the price would remain the same.
Question 133
A firm decides to exit the industry when
A. AC starts rising
B. MC starts rising
C. Price is less than LAC
D. TC starts rising
View Answer
Answer: Option C
Explanation:
A firm decides to exit the industry when Price is less than LAC. LAC at the efficient scale of production is thus the minimum average cost.
Question 134
A vertical supply curve parallel to the price axis implies that the elasticity of supply is
A. Zero
B. Infinity
C. Equal to one
D. Greater than zero but less than infinity
View Answer
Answer: Option A
Explanation:
A vertical supply curve parallel to the price axis implies that the elasticity of supply is Zero.
Question 135
It describes the law of supply
A. Supply curve
B. Supply schedule
C. Supply equation
D. All of the above
View Answer
Answer: Option D
Explanation:
Supply curve, Supply schedule and Supply equation describes the law of supply.
Question 136
With which of the theories of wages, is the name of John Stuart Mill associated?
A. Marginal productivity theory of wages
B. Wages-fund theory
C. Subsistence theory of wages
D. Iron aw of wages
View Answer
Answer: Option B
Explanation:
With Wages-fund theory, the name of John Stuart Mill associated. Mill said that wages mainly depend upon demand for and supply of labour or the proportion between population and capital available.
Question 137
An indifference curve slopes down towards right since more of one commodity and less of another result in
A. Same satisfaction
B. Greater satisfaction
C. Maximum satisfaction
D. Decreasing expenditure
View Answer
Answer: Option A
Explanation:
An indifference curve slopes down towards right since more of one commodity and less of another result in Same satisfaction.
Question 138
If a firm shuts down temporarily, it will incur loss equal to
A. AFC
B. AVC
C. TFC
D. TVC
View Answer
Answer: Option C
Explanation:
If a firm shuts down temporarily, it will incur loss equal to TFC. The intersection of the average variable cost curve and the marginal cost curve, which shows the price where the firm would lack enough revenue to cover its variable costs, is called the shutdown point. If the perfectly competitive firm can charge a price above the shutdown point, then the firm is at least covering its average variable costs. It is also making enough revenue to cover at least a portion of fixed costs, so it should limp ahead even if it is making losses in the short run, since at least those losses will be smaller than if the firm shuts down immediately and incurs a loss equal to total fixed costs.
Question 139
In the context of oligopoly, the kinked demand curve hypothesis is designed to explain
A. Price and output determination
B. Price rigidity
C. Price leadership
D. Collusion among rivals
View Answer
Answer: Option B
Explanation:
In the context of oligopoly, the kinked demand curve hypothesis is designed to explain Price rigidity. The curve is more elastic above the kink and less elastic below it. This means that the response to a price increase is less than the response to a price decrease.
Question 140
During a particular year, farmers experienced a dry weather. If all the other factors remain constant, farmers supply curve for wheat will shift
A. Rightward
B. Leftward
C. Upward
D. None of the above
View Answer
Answer: Option B
Explanation:
During a particular year, farmers experienced a dry weather. If all the other factors remain constant, farmers supply curve for wheat will shift Leftward.
Question 141
The supply of a commodity refers to
A. Actual production of the commodity
B. Total existing stock of the commodity
C. Stock available for sale
D. Amount of the commodity offered for sale at a particular price per unit of time
View Answer
Answer: Option D
Explanation:
The supply of a commodity refers to amount of the commodity offered for sale at a particular price per unit of time. Price of a commodity is determined by the demand for and supply of a commodity.
Question 142
Profit is maximum when
A. TC and TR curves are parallel
B. MC and MR curves are parallel
C. TC and TR curves cross each other
D. AC and AR curves cross each other
View Answer
Answer: Option A
Explanation:
Profit is maximum when TC and TR curves are parallel. Profit becomes maximum irrespective of the market situation, when the difference between total revenue (TR) and total cost (TC) becomes the greatest.
Question 143
Economic rent can accrue to
A. Land only
B. Capital only
C. Specialized technical personnel only
D. Any of the factors of production
View Answer
Answer: Option D
Explanation:
Economic rent can accrue to any of the factors of production. Economic rent is any payment to an owner or factor of production in excess of the costs needed to bring that factor into production.
Question 144
Supply curve will shift when
A. Price falls
B. Price rises
C. Demand shots
D. Technology changes
View Answer
Answer: Option D
Explanation:
Supply curve will shift when Technology changes. Factors that can shift a supply curve either to the left or the right are changes in input prices, number of sellers, technology, social concerns and expectations.
Question 145
Under perfect competition
A. AC=AVC
B. AR=AC
C. AR=MC
D. AR=MR
View Answer
Answer: Option D
Explanation:
Under perfect competition AR=MR. If the market price is unaffected by variations in the firm's output, then the firm's demand curve, its AR curve and MR curve will coincide in the same horizontal line.
Question 146
The Revealed Preference Theory deduces the inverse price-quantity relationship from
A. Assumption of indifference
B. Postulate of utility maximization
C. Observed behavior of the consumer
D. Introspection
View Answer
Answer: Option C
Explanation:
The Revealed Preference Theory deduces the inverse price-quantity relationship from observed behavior of the consumer. Revealed preference theory asserts that the best way to measure consumer preferences is to observe their purchasing behavior.
Question 147
When supply of a commodity increases without change in price, it is called
A. Fall in supply
B. Expansion in supply
C. Contraction in supply
D. Rise in supply
View Answer
Answer: Option D
Explanation:
When supply of a commodity increases without change in price, it is called rise in supply.
Question 148
Which form of market structure is characterised by interdependence in decision-making as between the different competing firms?
A. Oligopoly
B. Perfect competition
C. Imperfect competition
D. None of the above
View Answer
Answer: Option A
Explanation:
Oligopoly form of market structure is characterised by interdependence in decision-making as between the different competing firms. An oligopoly is a market form wherein a market or industry is dominated by a small number of large sellers (oligopolists). Oligopolies can result from various forms of collusion which reduce competition and lead to higher prices for consumers. Oligopolies have their own market structure.
Question 149
Which cost increases continuously with the increase in production?
A. Avearge cost
B. Marginal cost
C. Fixed cost
D. Variable cost
View Answer
Answer: Option D
Explanation:
Variable cost increases continuously with the increase in production. Variable cost varies at different level of output, this implies that when the output of a particular firm is at zero, the variable cost will be zero and when there is increase in production of output, there will also be a corresponding increase in the variable cost.
Question 150
A factor of production, whose supply is fixed in the short run, may get additional earnings. These earnings are generally referred to as
A. Surplus value
B. Quasi-rent
C. Transfer earnings
D. Super normal profits
View Answer
Answer: Option B
Explanation:
A factor of production, whose supply is fixed in the short run, may get additional earnings. These earnings are generally referred to as Quasi-rent. The earnings from machines and instruments are termed as quasi-rent. The quasi-rent refers to the income produced when the demand for products increases suddenly.
Question 151
A factor of production, whose supply is fixed in the short tun, may get additional earnings. These earnings are generally referred to as
A. Surplus value
B. Quasi-rent
C. Transfer earnings
D. Super normal profits
View Answer
Question 152
The necessary condition for equilibrium position of a firm is
A. MR>MC
B. MC>Price
C. MC=MR
D. MC=AC
View Answer
Answer: Option C
Explanation:
The necessary condition for equilibrium position of a firm is MC=MR. A firm is in equilibrium when it has no tendency to change its level of output. It needs neither expansion nor contraction. It wants to earn maximum profits in by equating its marginal cost with its marginal revenue, i.e. MC = MR.
Question 153
In May 2013, firm was supplying 500kg of sugar at market price of Rs.30/- per kg. During June 2013, firm's supply of sugar had decreased to 450kg at price of Rs.20/- per kg. These changes show that supply of sugar is
A. Oerfectly elastic
B. Perfectly inelastic
C. Less elastic
D. More elastic
View Answer
Answer: Option C
Explanation:
In May 2013, firm was supplying 500kg of sugar at market price of Rs.30/- per kg. During June 2013, firm's supply of sugar had decreased to 450kg at price of Rs.20/- per kg. These changes show that supply of sugar is less elastic.
Question 154
Law of return applies to firms working in
A. Perfect competition
B. Monopoly
C. Small firm
D. All kinds of market situations
View Answer
Answer: Option D
Explanation:
Law of return applies to firms working in all kinds of market situations. A firm's production function could exhibit different types of returns to scale in different ranges of output.
Question 155
Which of the following cost curves is never U-shaped?
A. Average cost curve
B. Marginal cost curve
C. Average variable cost curve
D. Average fixed cost curve
View Answer
Answer: Option D
Explanation:
Average fixed cost curve is never U-shaped. The average fixed costs AFC curve is downward sloping because fixed costs are distributed over a larger volume when the quantity produced increases.
Question 156
Which is NOT a cause of shift in cost curves of a firm?
A. Excise tax
B. Prices of inputs
C. Increase in productivity
D. Price of product
View Answer
Answer: Option D
Explanation:
Price of product is not a cause of shift in cost curves of a firm. Cost curves shift in response to changes in two factors: If a technological change results in the firm using more capital, the average fixed cost curve shifts upward and at low levels of output, the average total cost curve may shift upward. At large output levels, average total cost decreases.
Question 157
The classical theory explained interest as a reward for
A. Parting with liquidity
B. Abstinence
C. Saving
D. Inconvenience
View Answer
Answer: Option C
Explanation:
The classical theory explained interest as a reward for Saving. According to the classical theory, interest is the price paid for saving of capital. Like the value of other things, the price of saving is determined by its demand for and supply of savings.
Question 158
When a competitive firm achieves long run equilibrium, then,
A. P=MC
B. MR=MC
C. P=ATC
D. All of the above
View Answer
Answer: Option D
Explanation:
When a competitive firm achieves long run equilibrium, then, P=MC, MR=MC and P=ATC.
Question 159
Who first raised the fear of a world food shortage?
A. David Ricardo
B. T.R.Malthus
C. J.S.Mill
D. J.B.Say
View Answer
Answer: Option B
Explanation:
T.R.Malthus first raised the fear of a world food shortage. In 1798 Thomas Robert Malthus famously predicted that short-term gains in living standards would inevitably be undermined as human population growth outstripped food production, and thereby drive living standards back toward subsistence.
Question 160
What best explains a shift in market supply curve to the right?
A. An advertising campaign is successful in promoting the good
B. A new technique makes it cheaper to produce the good
C. The government introduces a tax on the good
D. The price of raw materials increases
View Answer
Answer: Option B
Explanation:
A new technique makes it cheaper to produce the good best explains a shift in market supply curve to the right. A rightward shift in the supply curve, say from a new production technology, leads to a lower equilibrium price and a greater quantity.
Question 161
The minimum wage is an example of
A. Price floor
B. Price ceiling
C. Equilibrium wage
D. Efficiency of labour
View Answer
Answer: Option A
Explanation:
The minimum wage is an example of Price floor. A price floor is the absolute minimum price at which a good or service (labor in this case) can be sold and it is usually set by the government. Price floors are set above the market equilibrium price of a good or service.
Question 162
Total costs in the short-term are classified into fixed costs and variable costs. Which one of the following is a variable cost?
A. Cost of raw material
B. Cost of equipment
C. Interest payment on past borrowing
D. Payment of rent on buildings
View Answer
Answer: Option A
Explanation:
Total costs in the short-term are classified into fixed costs and variable costs. Cost of raw material is a variable cost. Variable costs vary based on the amount of output, while fixed costs are the same regardless of production output.
Question 163
During short period, diminishing returns may follow because
A. Quantity of labour is fixed
B. Quantity of output is fixed
C. Quantity of capital is fixed
D. Quantity of any one factor is fixed
View Answer
Answer: Option D
Explanation:
During short period, diminishing returns may follow because quantity of any one factor is fixed.
Question 164
The most efficient scale of production of a firm is where
A. LAC is minimum
B. SAC is minimum
C. LMC is minimum
D. SMC is minimum
View Answer
Answer: Option A
Explanation:
The most efficient scale of production of a firm is where LAC is minimum. LAC at the efficient scale of production is thus the minimum average cost.
Question 165
MC is given by
A. Slope of TFC
B. Slope of TC
C. Slope of AC
D. None of the above
View Answer
Answer: Option B
Explanation:
MC is given by Slope of TC. Slope tells us how (total) costs change when we change output/quantity produced.
Question 166
A firm should shut down in the short run if it is not covering its
A. Variable cost
B. Fixed cost
C. Total cost
D. Explicit cost (money outlays)
View Answer
Answer: Option A
Explanation:
A firm should shut down in the short run if it is not covering its Variable cost. In the short run, a firm that is operating at a loss (where the revenue is less that the total cost or the price is less than the unit cost) must decide to operate or temporarily shutdown. The shutdown rule states that “in the short run a firm should continue to operate if price exceeds average variable costs. ”
Question 167
When was Adam Smith's major work "An enquiry into the Nature and Causes of Wealth of Nations" published?
A. 1756
B. 1766
C. 1776
D. 1786
View Answer
Answer: Option C
Explanation:
In 1776, Adam Smith's major work "An enquiry into the Nature and Causes of Wealth of Nations" was published.
Question 168
Economic problems arise because
A. Wants are unlimited
B. Resources are scarce
C. Scare resources have alternative uses
D. All of the above
View Answer
Answer: Option D
Explanation:
Economic problems arise because Wants are unlimited, Resources are scarce and Scare resources have alternative uses.
Question 169
The standard of living of workers depends upon their
A. Nominal wages
B. Real wages
C. Average product
D. Government policy
View Answer
Answer: Option B
Explanation:
The amount of goods and services which the labourer actually gets is called his real wages. The standard of living and the prosperity of a labourer depend not on his money wages but on his real wages.
Question 170
In the short run, when the output of a firm increases, its average fixed cost
A. Increases
B. Decreases
C. Remains constant
D. First declines and then rises
View Answer
Answer: Option B
Explanation:
In the short run, when the output of a firm increases, its average fixed cost decreases.
Question 171
Which of the following is example of external economies of scale?
A. Discount on purchases of raw materials
B. Technical progress leads to development of machine at low price
C. Hiring of specialized staff due to increase in scale of production
D. A firm starts producing by-products
View Answer
Answer: Option B
Explanation:
Technical progress leads to development of machine at low price is example of external economies of scale.
Question 172
Elinor Ostrom and Oliver Williamson are the Nobel Prize Laureates in Economics in 2009. Do you know in which year was Francois Quesnay's Tableu Economique published?
A. 1767
B. 1764
C. 1761
D. 1758
View Answer
Answer: Option D
Explanation:
Elinor Ostrom and Oliver Williamson are the Nobel Prize Laureates in Economics in 2009. In the year 1758, Francois Quesnay's Tableu Economique was published.
Question 173
TC curve
A. Starts from origin
B. Does not start from origin
C. Is parallel to Y-axis
D. None of the above
View Answer
Answer: Option B
Explanation:
TC curve does not start from origin. The shape of the total cost curve is based on short-run production returns, especially the law of diminishing marginal returns. Another observation is that the total cost curve does not go through the origin, but rather begins at a positive value on the vertical axis. This vertical intercept indicates fixed cost.
Question 174
Identify the author of "The principles of Political Economy and Taxation"
A. Alfred Marshall
B. J.S.Mill
C. David Ricardo
D. A. Turgot
View Answer
Answer: Option C
Explanation:
The Principles of Political Economy and Taxation (19 April 1817) is a book by David Ricardo on economics. Ricardo claims in the preface that Turgot, Stuart, Adam Smith, Jean-Baptiste Say, Sismondi, and others had not written enough "satisfactory information" on the topics of rent, profit, and wages.
Question 175
"The real price of everything, what every thing really costs to the man who wants to require it, is the toil and trouble of acquiring it. Who made this statement?
A. Karl Marx
B. Adam Smith
C. David Ricardo
D. J.S.Mill
View Answer
Answer: Option C
Explanation:
"The real price of everything, what every thing really costs to the man who wants to require it, is the toil and trouble of acquiring it. David Ricardo made this statement.
Question 176
Which is not a central problem of an economy?
A. What to produce
B. How to produce
C. How to maximize private profit
D. For whom to produce
View Answer
Answer: Option C
Explanation:
How to maximize private profit is not a central problem of an economy. Some of the central problems that are faced by every economy of a country are as follows: Production, distribution and disposition of goods and services are the basic economic activities of life. In the course of these activities, every society has to face scarcity of resources.
Question 177
As for the cost of production of an individual farmer, the rent paid by him
A. Enters into the price of his product
B. Does not enter into price of his product
C. Is unjustified
D. None of the above
View Answer
Answer: Option A
Explanation:
As for the cost of production of an individual farmer, the rent paid by him enters into the price of his product. The classical political economists found value to be determined in production; since most of the cost of production could be reduced to labor, this approach was refined into the Labor Theory of Value.
Question 178
Human wants are
A. One thousand
B. Few
C. Innumerable
D. Countable
View Answer
Answer: Option C
Explanation:
Human wants are Innumerable. With the passage of time and human progress, we find a marked growth in the number and variety of wants. Modern man has countless wants.
Question 179
A significant property of the Cobb-Douglas production function is that the elasticity of substitution between inputs is
A. Equal to 1
B. More than 1
C. Less than 1
D. 0
View Answer
Answer: Option A
Explanation:
A significant property of the Cobb-Douglas production function is that the elasticity of substitution between inputs is Equal to 1.
Question 180
TVC curve
A. Starts from origin
B. Does not start from origin
C. Is parallel to Y-axis
D. None of the above
View Answer
Answer: Option A
Explanation:
TVC curve starts from origin. TVC starts from origin which shows TVC is zero when output is zero. TC curve is derived by adding the TFC and TVC curve.
Question 181
Who is generally regarded as the founder of the 'Classical School'?
A. David Ricardo
B. Adam Smith
C. T.R.Malthus
D. J.S.Mill
View Answer
Answer: Option B
Explanation:
Adam Smith is generally regarded as the founder of the 'Classical School'.
Question 182
"Rent is a creation of value, not of wealth". Who made this observation?
A. Adam Smith
B. David Ricardo
C. Alfred Marshall
D. A.C.Pigou
View Answer
Answer: Option B
Explanation:
"Rent is a creation of value, not of wealth". David Ricardo made this observation.
Question 183
These are kinds of rent EXCEPT
A. Differential rent
B. Scarcity rent
C. Mobility rent
D. Location rent
View Answer
Answer: Option C
Explanation:
These are kinds of rent except mobility rent.
Question 184
Union leaders are in better position to bargain for higher wages if demand for labour is
A. Elastic
B. Inelastic
C. Very large
D. Permanent
View Answer
Answer: Option B
Explanation:
Union leaders are in better position to bargain for higher wages if demand for labour is Inelastic. The capacity of trade unions to raise wages in a particular industry depends on the elasticity of demand for labour.
Question 185
A consumer is in equilibrium when marginal utilities are
A. Minimum
B. Highest
C. Equal
D. Increasing
View Answer
Answer: Option C
Explanation:
A consumer is in equilibrium when marginal utilities are equal. A consumer is in equilibrium when he derives maximum satisfaction from the goods and is in no position to rearrange his purchases.
Question 186
Economies of scale are of two kinds
A. Temporary and permanent
B. Internal and external
C. Managerial and industrial
D. Natural and artificial
View Answer
Answer: Option B
Explanation:
Economies of scale are of two kinds Internal and external. Internal economies of scale are firm-specific or caused internally while external economies of scale occur based on larger changes outside the firm. Both result in declining marginal costs of production, yet the net effect is the same.
Question 187
TC curve
A. Rises continously
B. Falls after reaching a maximum
C. Is horizontal
D. None of the above
View Answer
Answer: Option A
Explanation:
TC curve rises continously. Total cost (TC) is the total economic cost of production and is made up of variable cost, which varies according to the quantity of a good produced and includes inputs such as labour and raw materials, plus fixed cost, which is independent of the quantity of a good produced and includes inputs that cannot be varied in the short term: fixed costs such as buildings and machinery, including sunk costs if any. Since cost is measured per unit of time, it is a flow variable.
Question 188
In which year, was the first volume of Das Capital by Karl Marx published?
A. 1848
B. 1859
C. 1867
D. 1873
View Answer
Answer: Option C
Explanation:
The first of three volumes of Das Kapital was published on 14 September 1867, dedicated to Wilhelm Wolff and was the sole volume published in Marx's lifetime.
Question 189
Which statement is true
A. ATC + AVC = AFC
B. ATC + MC = AFC
C. ATC + AFC = AVC
D. AFC + AVC = ATC
View Answer
Answer: Option D
Explanation:
AFC + AVC = ATC is true.
Question 190
According to Keynes, interest is a payment for
A. Consumer's preference
B. Producer's preference
C. Liquidity preference
D. State Bank's preference
View Answer
Answer: Option C
Explanation:
According to Keynes, interest is a payment for Liquidity preference. The Liquidity Preference Theory says that the demand for money is not to borrow money but the desire to remain liquid. In other words, the interest rate is the 'price' for money.
Question 191
Identify the economist who had little formal education and started working in the money market at an early age of fourteen.
A. David Ricardo
B. Adam Smith
C. V.F.D. Pareto
D. A.A. Cournot
View Answer
Answer: Option A
Explanation:
David Ricardo the economist had little formal education and started working in the money market at an early age of fourteen. At the age of 14 he entered into business with his father, who had made a fortune on the London Stock Exchange.
Question 192
When marginal is negative, it must be true that
A. The average is negative
B. The average is decreasing
C. The total is negative
D. The total is decreasing
View Answer
Answer: Option D
Explanation:
When marginal is negative, it must be true that the total is decreasing. Marginal utility may decrease into negative utility, as it may become entirely unfavorable to consume another unit of any product.
Question 193
In which form, the largest percentage of national income is earned?
A. Interest income
B. Proprietor's income
C. Employee' wages
D. Rental income
View Answer
Answer: Option C
Explanation:
In the form of Employee' wages, the largest percentage of national income is earned.
Question 194
All the following curves are U-shaped except
A. AVC
B. AFC
C. AC
D. MC
View Answer
Answer: Option B
Explanation:
All the following curves are U-shaped except AFC. The AFC curve is a rectangular hyperbola in the sense that all rectangles formed by AFC are of equal sizes. The AFC curve is asymptotic to both the axes. This means that it touches neither the horizontal axis nor the vertical axis.
Question 195
The Critique of Political Economy, the first fruits of Karl Marx's long painstaking research at the British Museum, appeared in
A. 1859
B. 1857
C. 1855
D. 1853
View Answer
Answer: Option A
Explanation:
The Critique of Political Economy, the first fruits of Karl Marx's long painstaking research at the British Museum, appeared in 1859.
Question 196
Interest is paid because
A. Capital is scarce
B. Capital is productive
C. Capital is attractive
D. Capital is surplus
View Answer
Answer: Option A
Explanation:
Interest is paid because Capital is scarce. The borrower can get additional income from borrowed capital and in easily afford to pay interest. Hence it is scarcity.
Question 197
The term 'marginal' in economics means
A. Unimportant
B. Additional
C. The minimum unit
D. Just barely passing
View Answer
Answer: Option B
Explanation:
The term 'marginal' in economics means Additional. In economics, the term marginal is used to indicate the change in some benefit or cost. when an additional unit is produced. For instance, the marginal revenue is the change in. total revenue when an additional unit is produced.
Question 198
The cost which a firm incurs for purchasing or hiring factors is called
A. Implicit
B. Explicit
C. Real
D. Nominal
View Answer
Question 199
The Communist Manifesto, written jointly by Marx and Engels's was published in
A. 1843
B. 1848
C. 1853
D. 1859
View Answer
Answer: Option B
Explanation:
The Communist Manifesto, written jointly by Marx and Engels's was published in 1848.
Question 200
Every factor of production gets rewarded equal to its
A. Cost
B. Marginal product
C. Price
D. Increasing return
View Answer
Answer: Option B
Explanation:
Every factor of production gets rewarded equal to its Marginal product. No single firm can influence the market price of a factor of production. Therefore, in order to get the equilibrium position, a firm will employ labourers up to a point where their respective marginal revenue productivity is equal to their wage rate.
Question 201
The three broad types of productive resources are
A. Money, profit and interest
B. Capital, labour and natural resources
C. Bond, stock shares and deposits
D. Technology, human capital and markets
View Answer
Answer: Option B
Explanation:
The three broad types of productive resources are Capital, labour and natural resources.
Question 202
Utility is more closely related to the term
A. Useful
B. Useless
C. Necessary
D. Satisfaction
View Answer
Answer: Option D
Explanation:
Utility is more closely related to the term Satisfaction. The term was introduced initially as a measure of pleasure or satisfaction within the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill.
Question 203
Economic development of a country requires
A. Skilled labour
B. Diplomacy
C. Abundant natural resources
D. a' and 'c' both
View Answer
Answer: Option D
Explanation:
Economic development of a country requires Skilled labour and Abundant natural resources.
Question 204
The short run
A. Is less than one year
B. Requires that at least one input is fixed
C. Requires that all inputs are fixed
D. Is just long enough to permit entry and exit
View Answer
Answer: Option B
Explanation:
The short run Requires that at least one input is fixed. The short run is a concept that states that, within a certain period in the future, at least one input is fixed while others are variable.
Question 205
Profits are
A. Residual payment
B. Pre-determined
C. Fixed contract
D. Always higher than wages
View Answer
Answer: Option A
Explanation:
Profits are Residual payment. Residual payments are most often associated with the entertainment industry, since movies and music can generate revenues long after they are originally released.
Question 206
Who stated explicitly for the first time, the Law of Comparative Costs?
A. David Ricardo
B. Adam Smith
C. James Mill
D. Thomas Mun
View Answer
Answer: Option A
Explanation:
David Ricardo stated explicitly for the first time, the Law of Comparative Costs. Absolute advantage refers to the uncontested superiority of a country to produce a particular good better. Comparative advantage introduces opportunity cost as a factor for analysis in choosing between different options for production.
Question 207
Diminishing marginal utility is the basis of
A. Law of supply
B. Law of demand
C. Law of returns
D. None of the above
View Answer
Answer: Option B
Explanation:
Diminishing marginal utility is the basis of Law of demand. When the price of a goods falls, downward sloping marginal utility curve implies that the consumers must buy more of the good so that its marginal utility falls and becomes equal to the new price.
Question 208
Productivity of land can be raised by
A. Extensive cultivation
B. Intensive cultivation
C. Better marketing
D. a' and 'b' both
View Answer
Answer: Option B
Explanation:
Productivity of land can be raised by Intensive cultivation. Intensive Farming is a farming method that uses higher inputs and advanced agricultural techniques to increase the overall yield.
Question 209
According to Keynes, interest is a payment for
A. Use of durable goods
B. Use of capital
C. Use of money
D. Use of land
View Answer
Answer: Option C
Explanation:
According to Keynes, the rate of interest is purely “a monetary phenomenon.” Interest is the price paid for borrowed funds. People like to keep cash with them rather than investing cash in assets. Thus, there is a preference for liquid cash.
Question 210
Demand curve slopes downward because of the law of
A. Consumer equilibrium
B. Utility maximization
C. Utility minimization
D. Diminishing marginal utility
View Answer
Answer: Option D
Explanation:
Demand curve slopes downward because of the law of Diminishing marginal utility. The law of diminishing marginal utility states that with each increasing quantity of the commodity, its marginal utility declines.
Question 211
Land only
A. Is a free gift of nature
B. Lacks geographical mobility
C. Is not hirable
D. a' and 'b' both
View Answer
Answer: Option D
Explanation:
Land only Is a free gift of nature and it lacks geographical mobility.
Question 212
The long run is a
A. Period of three years or longer
B. Period long enough to allow firms to change plant size and capacity
C. Period long enough to allow firm to make economic decisions
D. A period which affects larger than smaller firms
View Answer
Answer: Option B
Explanation:
The period is long enough to allow firms to change plant size and capacity. The long run is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs.
Question 213
Profits
A. Are lower in the long run than in the short run
B. Can be negative
C. Are less in perfect competition than in monopoly
D. All of the above
View Answer
Answer: Option D
Explanation:
Profits are lower in the long run than in the short run, it can be negative and are less in perfect competition than in monopoly.
Question 214
The Purchasing Power Parity Theory' came into prominence in 1916 through the writings of
A. J.M.Keynes
B. L.E.Von Miser
C. Gustav Cassel
D. F.A.von Hayek
View Answer
Answer: Option C
Explanation:
The Purchasing Power Parity Theory' came into prominence in 1916 through the writings of Gustav Cassel.
Question 215
When Marginal Utility is zero, Total Utility is
A. Minimum
B. Maximum
C. Law of return
D. None of the above
View Answer
Answer: Option B
Explanation:
When Marginal Utility is zero, Total Utility is maximum. It is based in the law of diminishing marginal utility which says 'as more and more units of a good are consumed, MU i.e level of satisfaction derived from each successive unit goes on falling because desire for that commodity tend to fall.
Question 216
If rate of interest is 10%, the PV (present value) of Rs.100 received in 1 year's time is
A. 90
B. 90.9
C. 95
D. 110
View Answer
Answer: Option B
Explanation:
If rate of interest is 10%, the PV (present value) of Rs.100 received in 1 year's time is 90.9. "Present value" of a rupee received a year from now, is equal to only 90.9 paise [100/(1.1)].
Question 217
Which of the following is NOT an input?
A. Labour
B. Entrepreneurship
C. Natural resources
D. Production
View Answer
Answer: Option D
Explanation:
Production is not an input. It is an output. Production is the method of turning raw materials or inputs into finished goods or products in a manufacturing process.
Question 218
Law of substitution is another name for law of
A. Law of diminishing MU
B. Law of Equi-MU
C. Law of demand
D. Satisfaction
View Answer
Answer: Option B
Explanation:
Law of substitution is another name for law of Law of Equi-MU. The Law of equimarginal Utility is another fundamental principle of Economics. This law is also known as the Law of substitution or the Law of Maximum Satisfaction.
Question 219
Which of the following input factor takes risk, innovates and coordinates
A. Capital
B. Labour
C. Productivity
D. Entrepreneur
View Answer
Answer: Option D
Explanation:
Entrepreneur input factor takes risk, innovates and coordinates. An entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards. The entrepreneur is commonly seen as an innovator, a source of new ideas, goods, services, and business/or procedures.
Question 220
As output increases, AC curve
A. Falls
B. Rises
C. Remains constant
D. All of the above
View Answer
Answer: Option D
Explanation:
The average cost is U-shaped because an increase in output increases the returns and reduces the total cost. As the curve continues to slope downwards, it enters a phase of constant returns where the returns and output are at their optimum level. After the constant level, continued increase in output stops yielding any further increments in the returns (diminishing returns) and the costs begin to rise, forcing the curve to start sloping upwards.
Question 221
Some economists say that profit earner is a kind of
A. Rent receiver
B. Interest receiver
C. Wage earner
D. Government officer
View Answer
Answer: Option C
Explanation:
Some economists say that profit earner is a kind of Wage earner. Wage earner is a person who works for wages or salary.
Question 222
Quality of a commodity that satisfies some human want or need is called
A. Service
B. Demand
C. Utility
D. Efficiency
View Answer
Answer: Option C
Explanation:
Quality of a commodity that satisfies some human want or need is called Utility. Within economics the concept of utility is used to model worth or value, but its usage has evolved significantly over time. The term was introduced initially as a measure of pleasure or satisfaction within the theory of utilitarianism by moral philosophers such as Jeremy Bentham and John Stuart Mill.
Question 223
Which of the following is CORRECT with respect to resources?
A. Money is a capital good
B. Human skills are a labour input
C. Entrepreneur is part of the labour input
D. Natural resources include human input
View Answer
Answer: Option B
Explanation:
Human skills are a labour input is correct with respect to resources. The human or the interpersonal skills are the skills that present the managers' ability to interact, work or relate effectively with people. These skills enable the managers to make use of human potential in the company and motivate the employees for better results.
Question 224
Identify the work of Irving Fisher
A. A Treatese on Money
B. Policy against Inflation
C. The Making of Index numbers
D. Monetary Theory
View Answer
Answer: Option C
Explanation:
The Making of Index numbers is the work of Irving Fisher. Index numbers played an important role in his monetary theory, and his book The Making of Index Numbers has remained influential down to the present day. Fisher's main intellectual rival was the Swedish economist Knut Wicksell.
Question 225
The transformation of resources into economic goods and services is called
A. Technical efficiency
B. Input
C. Production
D. Increasing returns
View Answer
Answer: Option C
Explanation:
The transformation of resources into economic goods and services is called Production. Production is the method of turning raw materials or inputs into finished goods or products in a manufacturing process.
Question 226
Professor Knight is famous for his theory of
A. Rent
B. Profit
C. Population
D. Wages
View Answer
Answer: Option B
Explanation:
Professor Knight is famous for his theory of Profit. He is best known for his Risk, Uncertainty and Profit, a monumental study of the role of the entrepreneur in economic life.
Question 227
Risks in the business arise because of
A. Introduction of the new products
B. Uncertain policy of rival firms
C. Changes in tastes
D. All of the above
View Answer
Answer: Option D
Explanation:
Risks in the business arise because of Introduction of the new products, Uncertain policy of rival firms and Changes in tastes.
Question 228
When Marginal Utility is positive, Total Utility
A. Increases
B. Decreases
C. Remains constant
D. Is highest
View Answer
Answer: Option A
Explanation:
When Marginal Utility is positive, Total Utility Decreases. When we say that the total utility is increasing at a diminishing rate, we mean that amount of change in total utility is decreasing with the consumption of every extra unit which is nothing but marginal utility.
Question 229
Indifference curves are convex to the origin because
A. Two goods are perfect substitutes
B. Two goods are imperfect substitutes
C. Two goods are perfect complementary goods
D. None of the above
View Answer
Answer: Option B
Explanation:
Indifference curves are convex to the origin because two goods are imperfect substitutes.
Question 230
Standard of living of a country can be raised if it increases
A. Labour force
B. Production
C. Money supply
D. Exports
View Answer
Answer: Option B
Explanation:
Standard of living of a country can be raised if it increases Production. Labor productivity is a measure of the amount of goods and services that the average worker produces in an hour of work. The level of productivity is the single most important determinant of a country's standard of living, with faster productivity growth leading to an increasingly better standard of living.
Question 231
According to Malthus, population increases by progression of which kind?
A. Systematic
B. Arithmetic
C. Geometric
D. Automatic
View Answer
Answer: Option C
Explanation:
According to Malthus, population increases by progression of Geometric.
Question 232
Profit is maximum when
A. Distance between TR and TC is maximum
B. Distance between AR and AC is maximum
C. Distance between MR and MC is maximum
D. None of the above
View Answer
Answer: Option A
Explanation:
Profit is maximum when Distance between TR and TC is maximum. At the equilibrium point, the firm earns maximum profits.
Question 233
In Monopoly at various output levels
A. AR = MR
B. AR < MR
C. AR > MR
D. None of the above
View Answer
Answer: Option C
Explanation:
A firm under monopoly faces a downward sloping demand curve or average revenue curve. In monopoly, since average revenue falls as more units of output are sold, the marginal revenue is less than the average revenue. In other words, under monopoly the MR curve lies below the AR curve.
Question 234
All labour is
A. Homogeneous
B. Heterogeneous
C. Lazy
D. Intelligent
View Answer
Answer: Option B
Explanation:
All labour is Heterogeneous.
Question 235
Scarcity means
A. Non-availibility of goods
B. High price of goods
C. Less supply than demand
D. High profit of the firms
View Answer
Answer: Option C
Explanation:
Scarcity means Less supply than demand. Scarcity refers to the basic economic problem, the gap between limited – that is, scarce – resources and theoretically limitless wants. This situation requires people to make decisions about how to allocate resources efficiently, in order to satisfy basic needs and as many additional wants as possible.
Question 236
Mobility of labour
A. Increases efficiency of labour
B. Spoils labour
C. Increases division of labour
D. a' and 'c' both
View Answer
Answer: Option D
Explanation:
Mobility of labour Increases efficiency of labour and also increases division of labour.
Question 237
Who is the 'father of economics'?
A. Max Muller
B. Adam Smith
C. Karl Marx
D. None of the above
View Answer
Answer: Option B
Explanation:
Adam Smith is the 'father of economics'. Adam Smith is called the father of economics for his work on The Wealth of Nations which he published in 1776.
Question 238
Profit is maximum when
A. Slope of MC and Mr is the same
B. Slope of TC and TR is the same
C. Slope of AC and AR is the same
D. None of the above
View Answer
Answer: Option B
Explanation:
Profit is maximum when Slope of TC and TR is the same. To obtain the profit maximizing output quantity, we start by recognizing that profit is equal to total revenue (TR) minus total cost (TC).
Question 239
Passive factor of production is
A. Only Land
B. Only Capital
C. Both Land & Capital
D. Neither Land nor Capital
View Answer
Answer: Option C
Explanation:
Passive factor of production is both Land & Capital.
Question 240
Excise tax is a part of
A. Fixed cost
B. Variable cost
C. Implicit cost
D. Is not a part of cost
View Answer
Answer: Option B
Explanation:
Excise tax is a part of Variable cost. Excise duty is an indirect tax. That means the tax amount is included as part of the selling price. Excise duty, also known as excise tax, is ultimately passed on and paid by the consumer when he makes a purchase.
Question 241
Under law of demand
A. Price of commodity is an independent variable
B. Quantity demanded is a dependent variable
C. Reciprocal relationship is found between price and quantity demanded
D. All of the above
View Answer
Answer: Option D
Explanation:
Under law of demand Price of commodity is an independent variable, Quantity demanded is a dependent variable and Reciprocal relationship is found between price and quantity demanded.
Question 242
Unemployment due to mechanization of agriculture is
A. Seasonal
B. Structural
C. Industrial
D. Personal
View Answer
Answer: Option B
Explanation:
Unemployment due to mechanization of agriculture is Structural. Due to structural changes in the economy, structural unemployment may take place. Structural unemployment is caused by a decline in demand for production in a particular industry, and consequent disinvestment and reduction in its manpower requirements.
Question 243
For inferior commodities, income effect is
A. Zero
B. Negative
C. Infinite
D. Positive
View Answer
Answer: Option B
Explanation:
For inferior commodities, income effect is Negative. When price of an inferior good falls, its negative income effect will tend to reduce the quantity purchased, while the substitution effect will tend to increase the quantity purchased.
Question 244
The labour force participation rate is the
A. Proportion of population that is working
B. Proportion of population working or looking for work
C. Proportion of skilled workers population
D. Proportion of female workers to male workers
View Answer
Answer: Option C
Explanation:
The labour force participation rate is the proportion of skilled workers population. It refers to the number of people who are either employed or are actively looking for work.
Question 245
Mixed economy means an economy where
A. Both agriculture and industry are equally promoted by the state
B. There is co-existence of public sector along with private sector
C. There is importance of small scale industries along with heavy industries
D. Economy is controlled by military as well as civilian rulers
View Answer
Answer: Option B
Explanation:
Mixed economy means an economy where there is co-existence of public sector along with private sector. All modern economies are mixed where the means of production are shared between the private and public sectors. Also called dual economy.
Question 246
At the point of equilibrium of firm (under perfect competition)
A. MC curve must be rising
B. MC curve must be falling
C. MR cure must be rising
D. None of the above
View Answer
Answer: Option A
Explanation:
At the point of equilibrium of firm (under perfect competition) MC curve must be rising. If the firm is producing at an output level where the MC is falling, then this implies that it can further increase the profit by slightly raising the level of output. Equilibrium is established at the point where the MR is equal to MC and MC is rising.
Question 247
When total utility becomes maximum, then marginal utility will be
A. Minimum
B. Average
C. Zero
D. Negative
View Answer
Answer: Option C
Explanation:
When total utility becomes maximum, then marginal utility will be Zero. It is based in the law of diminishing marginal utility which says 'as more and more units of a good are consumed, MU i.e level of satisfaction derived from each successive unit goes on falling because desire for that commodity tend to fall.
Question 248
The shape of rectangular hyperbola is made by
A. MC
B. AFC
C. AVC
D. None of the above
View Answer
Answer: Option B
Explanation:
The shape of rectangular hyperbola is made by AFC. The AFC curve is a rectangular hyperbola in the sense that all rectangles formed by AFC are of equal sizes.
Question 249
Utility means
A. Power to satisfy a want
B. Usefulness
C. Willingness of a person
D. Harmfulness
View Answer
Answer: Option A
Explanation:
Utility means power to satisfy a want. It is a quality possessed by a commodity or service to satisfy human wants. Utility can also be defined as value-in-use of a commodity because the satisfaction which we get from the consumption of a commodity is its value-in-use.
Question 250
Unemployment of labour means that
A. A worker does not get full time job
B. A worker is not happy with his present job
C. A person does not get job according to his qualification
D. a' and 'c' both
View Answer
Answer: Option D
Explanation:
Unemployment of labour means that a worker does not get full time job and a person does not get job according to his qualification.
Question 251
Marginal utility is equal to average utility at that time when average utility is
A. Increasing
B. Maximum
C. Falling
D. Minimum
View Answer
Answer: Option B
Explanation:
Marginal utility is equal to average utility at that time when average utility is maximum.
Question 252
The human effort applied to the production of goods is called in economics
A. Labour
B. Skill
C. Experience
D. Service
View Answer
Answer: Option A
Explanation:
The human effort applied to the production of goods is called Labour in economics. Labor is the human effort that can be applied to the production of goods and services.
Question 253
Which one of the following is the task of the Planning Commission?
A. Preparation of the plan
B. Implementation of the plan
C. Financing of the plan
D. None of the above
View Answer
Answer: Option A
Explanation:
Preparation of the plan is the task of the Planning Commission. The Planning Commission is charged with the responsibility of making assessment of all resources in the country, augmenting deficient resources, formulating plans for the most effective and balanced utilisation of resources and determining priorities.
Question 254
Normal profit is
A. Part of total cost
B. Part of economic profit
C. Total revenue minus total cost
D. Total revenue minus implicit cost
View Answer
Answer: Option A
Explanation:
Normal profit is Part of total cost. Normal profit is an economic term that describes when a company's total revenues are equal to its total costs in a perfectly competitive market.
Question 255
As output increases
A. MC curve initially falls and then rises
B. MC initially rises and then falls
C. MC continuously rises
D. None of the above
View Answer
Answer: Option A
Explanation:
As output increases when MC curve initially falls and then rises. The Marginal Cost curve is U shaped because initially when a firm increases its output, total costs, as well as variable costs, start to increase at a diminishing rate. Then as output rises, the marginal cost increases.
Question 256
At the point of satiety, marginal utility is
A. Zero
B. Positive
C. Maximum
D. Negative
View Answer
Answer: Option B
Explanation:
At the point of satiety, marginal utility is positive. Goods where there is a point of satiety. This situation is common in food. To the point of satiety, the marginal utility is positive; after that point, the marginal utility is negative.
Question 257
Which of the following is a producer good?
A. Pen
B. Cycle
C. Mobile phone
D. Hammer
View Answer
Answer: Option D
Explanation:
Hammer is a producer good. A hammer is a durable rival good.
Question 258
Total utility of a commodity is measured by which price of that commodity?
A. Value in use
B. Value in exchange
C. Both of above
D. None of above
View Answer
Answer: Option A
Explanation:
Total utility of a commodity is measured by value in use price of that commodity. The utility theory of value was the belief that price and value were solely based on how much “use” an individual received from a commodity.
Question 259
According to Marshall, the basis of consumer surplus is
A. Law of diminishing MU
B. Law of Equi-MU
C. Law of proportions
D. All of the above
View Answer
Answer: Option A
Explanation:
According to Marshall, the basis of consumer surplus is Law of diminishing MU. As per the law, as we purchase more of a commodity, its marginal utility reduces. Since the price is fixed, for all units of the goods we purchase, we get extra utility. This extra utility is consumer surplus.
Question 260
He described economics as a science of material welfare
A. Robbins
B. Marshall
C. Ricardo
D. Keynes
View Answer
Answer: Option B
Explanation:
Marshall described economics as a science of material welfare. Marshall's view is that economics studies all the actions that people take in order to achieve economic welfare. In the words of Marshall, "man earns money to get material welfare."
Question 261
Economic profit is
A. Part of total cost
B. Total revenue minus total cost
C. Total revenue minus explicit cost
D. Total variable cost minus total fixed cost
View Answer
Answer: Option B
Explanation:
Economic profit is Total revenue minus total cost. Economic profit is the monetary costs and opportunity costs a firm pays and the revenue a firm receives. Economic profit = total revenue – (explicit costs + implicit costs).
Question 262
What implication does resource scarcity have for the satisfaction of wants?
A. Not all wants can be satisfied
B. We will never be faced with the need to make choices
C. We must develop ways to decrease our individual wants
D. The discovery of new natural resources is necessary to increase our ability to satisfy wants
View Answer
Answer: Option A
Explanation:
Resource scarcity for the satisfaction of wants implicates that not all wants can be satisfied. The classification of human wants is not a rigid concept.
Question 263
Unit cost is another name for
A. MC
B. AVC
C. ATC
D. AFC
View Answer
Answer: Option C
Explanation:
Unit cost is another name for ATC. Average total cost (ATC): the per-unit cost of output.
Question 264
Who expressed the view that 'Economics should be neutral between ends'?
A. Robbins
B. Marshall
C. Pigou
D. Adam Smith
View Answer
Answer: Option A
Explanation:
Robbins expressed the view that 'Economics should be neutral between ends'. He believes that Economics is concerned merely with the utilization of scarce means far the satisfaction of multiple ends.
Question 265
Which statement relates to macroeconomics?
A. Oil prices are rising in Pakistan
B. Profit rate is high on textile industry
C. The firms try to make huge profits
D. The government has failed to control inflation
View Answer
Answer: Option D
Explanation:
The government has failed to control inflation relates to macroeconomics. Governments can use wage and price controls to fight inflation, but that can cause recession and job losses. Governments can also employ a contradictory monetary policy to fight inflation by reducing the money supply within an economy via decreased bond prices and increased interest rates.
Question 266
Price-taking firms i.e., firms that operate in a perfectly competitive market, are said to be 'small' relative to the market. Which of the following best describes this smallness?
A. The individual firm must have fewer than 10 employees
B. The individual firm faces a downward-sloping demand curve
C. The individual firm has assets less than Rs. 20 lakhs
D. The individual firm is unable to affect market price through its output decisions
View Answer
Answer: Option D
Explanation:
The individual firm is unable to affect market price through its output decisions best describes this smallness.
Question 267
Ceteris Paribus means
A. Other things remaining same
B. All variables are independent
C. Enable economists to simplify reality
D. That no other assumptions are made
View Answer
Answer: Option A
Explanation:
Ceteris Paribus means other things remaining same. The Latin phrase ceteris paribus – literally, “holding other things constant” – is commonly translated as “all else being equal.” A dominant assumption in mainstream economic thinking, it acts as a shorthand indication of the effect of one economic variable on another, provided all other variables remain the same.
Question 268
A firm earns economic profit when total profit exceeds
A. Normal profit
B. Implicit costs
C. Explicit costs
D. Variable costs
View Answer
Answer: Option A
Explanation:
A firm earns economic profit when total profit exceeds Normal profit. Economic profit is the profitability measurement that calculates the amount that revenues received from selling a product exceeds opportunity costs incurred from using resources to make and sell these products.
Question 269
All inputs can be varied in
A. Short run
B. Long run
C. Both periods
D. None of the period
View Answer
Answer: Option B
Explanation:
All inputs can be varied in Long run. The long run is defined as a period in which all INPUTS are variable. Because of that all costs are variable too. You're right that in the short run your rent and the cost of the machines you've already bought are fixed costs. But in the long term they aren't.
Question 270
Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering rasiing prices, it can expect a relatively
A. Large fall in quantity demanded
B. Large fall in demand
C. Small fall in quantity demanded
D. Small fall in demand
View Answer
Answer: Option A
Explanation:
Suppose the demand for meals at a medium-priced restaurant is elastic. If the management of the restaurant is considering rasiing prices, it can expect a relatively large fall in quantity demanded.
Question 271
Which of the following is not a characteristic of a 'price taker'?
A. TR = P x Q
B. AR = Price
C. Negatively sloped demand
D. Marginal Revenue = Price
View Answer
Answer: Option C
Explanation:
Negatively sloped demand is not a characteristic of a 'price taker'. A price taker lacks enough market power. The objective of market to influence the prices of goods or services.
Question 272
In monopolistic competition, a firm is in long run equilibrium
A. At the minimum point of the LAC curve
B. In the declining segment of the LAC curve
C. In the rising segment of the LAC curve
D. When price is equal to marginal cost
View Answer
Answer: Option B
Explanation:
In monopolistic competition, a firm is in long run equilibrium is in the declining segment of the LAC curve.
Question 273
In a typical demand schedule, quantity demanded
A. Varies directly with price
B. Varies proportionately with price
C. Varies inversely with price
D. Is independent of price
View Answer
Answer: Option C
Explanation:
In a typical demand schedule, quantity demanded varies inversely with price. The law of demand states that a higher price typically leads to a lower quantity demanded.
Question 274
When the perfectly competitive firm and industry are in long run equilibrium, then
A. P = MR = SAC = LAC
B. D = MR = SMC = LMC
C. P = MR = Lowest point on the LAC curve
D. All of the above
View Answer
Answer: Option D
Explanation:
When the perfectly competitive firm and industry are in long run equilibrium, then P = MR = SAC = LAC, D = MR = SMC = LMC and, P = MR = Lowest point on the LAC curve.
Question 275
In monopoly, the relationship between average and marginal revenue curves is as follows
A. AR curve lies above the MR curve
B. AR curve coincides with the MR curve
C. AR curve lies below the MR curve
D. AR curve is parallel to the MR curve
View Answer
Answer: Option A
Explanation:
In monopoly, the relationship between average and marginal revenue curves is that AR curve lies above the MR curve.
Question 276
The total effect of a price change of a commodity is
A. Sustitution effect plus price effect
B. Substitution effect plus income effect
C. Substitution effect plus demonstration effect
D. Substitution effect minus income effect
View Answer
Answer: Option B
Explanation:
The total effect of a price change of a commodity is substitution effect plus income effect. The income effect is the change in consumption patterns due to a change in purchasing power. This occurs with income increases, price changes, and even currency fluctuations. Since income is not a good in and of itself (it can only be exchanged for goods and services), price decreases increase purchasing power.
Question 277
Which one of the following is true about Planning Commission?
A. It is a Ministry
B. It is a Government Department
C. It is an Advisory Body
D. It is an Autonomous Corporation
View Answer
Answer: Option C
Explanation:
Planning Commission is an Advisory Body. The Planning Commission is a non-constitutional and non-statutory body and is responsible to formulate five years plan for social and economic development in India.
Question 278
The following are some of the costs of a clothing manufacturer. State which among them will you consider as fixed cost?
A. Cost of cloth
B. Piece wages paid to workers
C. Depreciation on machines owing to time
D. Cost of electricity for running machines
View Answer
Answer: Option C
Explanation:
Depreciation on machines owing to time is considered as fixed cost. Depreciation is a fixed cost, because it recurs in the same amount per period throughout the useful life of an asset. Depreciation cannot be considered a variable cost, since it does not vary with activity volume. However, there is an exception.
Question 279
A firm encounters its 'shutdown point' when
A. Average total cost equals price at the profit-maximizing level of output
B. Average variable cost equals price at the profit-maximizing level of output
C. Average fixed cost equals price at the profit-maximizing level of output
D. Marginal cost equals price at the profit-maximizing level of output
View Answer
Answer: Option B
Explanation:
A firm encounters its 'shutdown point' when average variable cost equals price at the profit-maximizing level of output.
Question 280
Under ______ market condition, firms make normal profits in the long run.
A. Perfect competition
B. Monopoly
C. Oligopoly
D. None of the above
View Answer
Answer: Option A
Explanation:
Under Perfect competition market condition, firms make normal profits in the long run. In sum, in the long-run, companies that are engaged in a perfectly competitive market earn zero economic profits.
Question 281
The cost that a firm incurs in hiring or purchasing any factor of production is referred to as
A. Explicit cost
B. Implicit cost
C. Variable cost
D. Fixed cost
View Answer
Answer: Option A
Explanation:
The cost that a firm incurs in hiring or purchasing any factor of production is referred to as Explicit cost. An explicit cost is a direct payment made to others in the course of running a business, such as wage, rent and materials, as opposed to implicit costs, where no actual payment is made.
Question 282
Larger production of ___ goods would lead to higher production in future
A. Consumer goods
B. Capital goods
C. Agricultural goods
D. Public goods
View Answer
Answer: Option B
Explanation:
Larger production of Capital goods goods would lead to higher production in future. If investment in capital good increases ,in turn it further increases the production of consumer goods in the long run. So, if an economy is investing more in capital goods, it shows signs of growth in near future, an increase in GDP.
Question 283
Economic survey is published by
A. Ministry of Finance
B. Planning Commission
C. Government of India
D. Indian Statistical Institute
View Answer
Answer: Option A
Explanation:
The Department of Economic Affairs, Finance Ministry of India presents the Economic Survey in the parliament every year, just before the Union Budget.It is prepared under the guidance of the Chief Economic Adviser, Finance Ministry. It is the ministry's view on the annual economic development of the country.
Question 284
Supply of a commodity is a
A. Stock concept
B. Flow concept
C. Both stock and flow concept
D. None of the above
View Answer
Answer: Option B
Explanation:
Supply of a commodity is a flow concept. the commodity which the sellers or producers are able and willing to offer for sale at a particular price, during a certain period of time.
Question 285
A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is
A. Zero
B. Infinite
C. Equal to 1
D. Greater than 0 but less than 1
View Answer
Answer: Option B
Explanation:
A horizontal supply curve parallel to the quantity axis implies that the elasticity of supply is Infinite. The horizontal supply curve shows another extreme case, i.e., that of perfectly inelastic supply. The implication of such a supply curve is that a little price cut will cause the quantity supplied to fall to zero while a slightest increase in price will induce purchasers to offer an infinitely large quantity.
Question 286
If two goods were perfect substitutes of each other, it necessarily follows that
A. An indifference curve relating the two goods will be curvilinear
B. An indifference curve relating the two goods will be linear
C. An indifference curve relating the two goods will be divided into two segments which meet at a right angle
D. An indifference curve relating the two goods will be convex to the origin
View Answer
Answer: Option B
Explanation:
If two goods were perfect substitutes of each other, it necessarily follows that an indifference curve relating the two goods will be linear. As price rises for a fixed money income, the consumer seeks the less expensive substitute at a lower indifference curve.
Question 287
When ______, we know that the firms are earning just normal profits.
A. AC = AR
B. MC = MR
C. MC = AC
D. AR = MR
View Answer
Answer: Option A
Explanation:
When AC = AR, we know that the firms are earning just normal profits.
Question 288
The economic analysis expects the consumer to behave in a manner which is
A. Rational
B. Irrational
C. Emotional
D. Indifferent
View Answer
Answer: Option A
Explanation:
The economic analysis expects the consumer to behave in a manner which is Rational. The assumption of rational behavior implies that people would rather be better off than worse off. Most conventional economic theories are based on the assumption that all individuals taking part in an action or activity are behaving rationally.
Question 289
The MC curve cuts the AVC and ATC curves at
A. The falling part of each
B. Different points
C. Their respective minimas
D. The rising part of each
View Answer
Answer: Option C
Explanation:
The MC curve cuts the AVC and ATC curves at their respective minimas.
Question 290
Consumer surplus is highest in case of
A. Necessities
B. Luxuries
C. Comforts
D. Conventional necessities
View Answer
Answer: Option A
Explanation:
Consumer surplus is highest in case of necessities. Consumer surplus happens when the price that consumers pay for a product or service is less than the price they're willing to pay.
Question 291
The vertical difference between TVC and TC is equal to
A. MC
B. AVC
C. TFC
D. None of the above
View Answer
Answer: Option C
Explanation:
The vertical difference between TVC and TC is equal to TFC.
Question 292
Giffen goods are those goods
A. For which demand increases as price increases
B. That have a high income elasticity of demand
C. That are in short supply
D. None of the above
View Answer
Answer: Option A
Explanation:
Giffen goods are those goods for which demand increases as price increases. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand, which states that the quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve.
Question 293
The AR curve and industry demand curve are same in case of
A. Monopoly
B. Oligopoly
C. Perfect competition
D. None of the above
View Answer
Answer: Option A
Explanation:
The AR curve and industry demand curve are same in case of Monopoly. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. Perfect competition produces an equilibrium in which the price and quantity of a good is economically efficient.
Question 294
When the price of a substitute of X commodity falls, the demand for X
A. Rises
B. Falls
C. Remains unchanged
D. Any of the above
View Answer
Answer: Option B
Explanation:
When the price of a substitute of X commodity falls, the demand for X Falls.
Question 295
The law of variable proportions come into being when
A. There are only two variable factors
B. There is a fixed factor and a variable factor
C. All factors are variable
D. Variable factors yield less
View Answer
Answer: Option B
Explanation:
The law of variable proportions come into being when there is a fixed factor and a variable factor. The law of variable proportions states that as the quantity of one factor is increased, keeping the other factors fixed, the marginal product of that factor will eventually decline.
Question 296
If two goods are complements, this means that a rise in the price of one commodity will induce
A. An upward shift in demand for the other commodity
B. A rise in the price of the other commodity
C. A downward shift in demand for the other commodity
D. No shift in the demand for the other commodity
View Answer
Answer: Option C
Explanation:
If two goods are complements, this means that a rise in the price of one commodity will induce a downward shift in demand for the other commodity.
Question 297
_____ is an implicit cost of production
A. Wages of the labour
B. Charges for electricity
C. Interest on owned money capital
D. Payment for raw material
View Answer
Answer: Option C
Explanation:
Interest on owned money capital is an implicit cost of production. The costs in which there is no cash outlay, is known as Implicit Cost.
Question 298
In the short run if a perfectly competitive firm finds itself operating at a loss, it will
A. Reduce the size of its plant to lower fixed costs
B. Raise the price of its product
C. Shut down
D. Continue to operate as long as it covers its variable cost
View Answer
Answer: Option D
Explanation:
In the short run if a perfectly competitive firm finds itself operating at a loss, it will continue to operate as long as it covers its variable cost.
Question 299
Excess capacity is not found under
A. Monopoly
B. Monopolistic competition
C. Perfect competition
D. Oligopoly
View Answer
Answer: Option C
Explanation:
Excess capacity is not found under Perfect competition. Under perfect competition, each firm produces at the minimum point on its LAC curve and its horizontal demand curve is tangent to it at that point. Its output is ideal and there is no excess capacity in the long-run.
Question 300
A competitive firm maximizes profit at the output level where
A. Price equals marginal cost
B. The slope of the firm's profit function is equal to zero
C. Marginal revenue equals marginal cost
D. All of the above
View Answer
Answer: Option D
Explanation:
A competitive firm maximizes profit at the output level where Price equals marginal cost, The slope of the firm's profit function is equal to zero and Marginal revenue equals marginal cost.
Question 301
The average profit is the difference between
A. AC and TC
B. AC and VC
C. AC and AR
D. AC and TR
View Answer
Answer: Option C
Explanation:
The average profit is the difference between AC and AR.
Question 302
A necessity is defined as a good having
A. A positive income elasticity of demand
B. A negative income elasticity of demand
C. An income elasticity of demand between zero and 1
D. An income elasticity of more than 1
View Answer
Answer: Option C
Explanation:
A necessity is defined as a good having an income elasticity of demand between zero and 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good. A zero income elasticity of demand occurs when an increase in income is not associated with a change in the demand of a good.
Question 303
At the point of inflexion, the marginal product is
A. Increasing
B. Decreasing
C. Maximum
D. Negative
View Answer
Answer: Option C
Explanation:
At the point of inflexion, the marginal product is maximum. Upto the Point of Inflexion TP has been increasing at increasing rate resulting in increasing MP.
Question 304
In the long run, any firm will eventually leave the industry if
A. Price does not at least cover average total cost
B. Price does not equal marginal cost
C. Economies of sale are being reaped
D. Price is greater than long run average cost
View Answer
Answer: Option A
Explanation:
In the long run, any firm will eventually leave the industry if Price does not at least cover average total cost. Exit is the long-run process of firms reducing production and shutting down in response to industry losses.
Question 305
Marginal revenue will be negative if elasticity of demand is
A. Less than unity
B. More than 1
C. Equal to 1
D. Equal to zero
View Answer
Answer: Option A
Explanation:
Marginal revenue will be negative if elasticity of demand is less than unity. At a quantity greater than ON price elasticity on the demand curve, curve is less than one and the marginal revenue is negative.
Question 306
If a firm's average variable cost curve is rising, its marginal cost curve must be
A. Constant
B. Above the total cost curve
C. Above the average variable cost curve
D. All of the above
View Answer
Answer: Option C
Explanation:
If a firm's average variable cost curve is rising, its marginal cost curve must be above the average variable cost curve. If average costs are falling then marginal costs must be less than average while if average costs are rising then marginal must be more than average. Marginal cost on its way up must cut the cost curve at its minimum point. If Marginal Cost is less than Average Variable Cost, then Average Cost goes down.
Question 307
If lowering of fares reduces railway's revenues and increasing of fares increases, then the demand for rail travel has a price elasticity of
A. Zero
B. Greater than Zero but less than One
C. One
D. Greater than One
View Answer
Answer: Option B
Explanation:
If lowering of fares reduces railway's revenues and increasing of fares increases, then the demand for rail travel has a price elasticity of Greater than Zero but less than One.
Question 308
If the marginal (additional) opportunity cost is a constant then the PPC would be
A. Straight line
B. Convex
C. Backward leading
D. Concave
View Answer
Answer: Option A
Explanation:
If the marginal (additional) opportunity cost is a constant then the PPC would be Straight line. Ppc constant means goods are perfect substitute if they are perfect substitute then that curve is a straight line
Question 309
When a market is in equilibrium
A. No shortage exists
B. Quantity demanded equals quantity supplied
C. A price is established that clears the market
D. All of the above are correct
View Answer
Answer: Option D
Explanation:
When a market is in equilibrium No shortage exists, Quantity demanded equals quantity supplied and A price is established that clears the market.
Question 310
A market structure in which many firms sell products that are similar but not identical is known as
A. Monopolistic competition
B. Monopoly
C. Perfect competition
D. Oligopoly
View Answer
Answer: Option A
Explanation:
A market structure in which many firms sell products that are similar but not identical is known as Monopolistic competition. Monopolistic competition characterizes an industry in which many firms offer products or services that are similar, but not perfect substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect those of its competitors.
Question 311
If a good is a luxury, its income elasticity of demand is
A. Positive and less than 1
B. Negative but greater than 1
C. Positive and greater than 1
D. Zero
View Answer
Answer: Option C
Explanation:
If a good is a luxury, its income elasticity of demand is Positive and greater than 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good.
Question 312
When ____, we know that the firms must be producing at the minimum point of the average cost curve and so there will be productive efficiency.
A. AC = AR
B. MC = AC
C. MC = MR
D. AR = MR
View Answer
Answer: Option B
Explanation:
When MC = AC, we know that the firms must be producing at the minimum point of the average cost curve and so there will be productive efficiency.
Question 313
Economics is the study of
A. how society manages its unlimited resources
B. how to reduce our wants until we are satisfied
C. how society manages its scarce resources
D. how to fully satisfy our unlimited wants
View Answer
Answer: Option C
Explanation:
Economics is the study of how society manages its scarce resources. Resources are scarce in that we have fewer resources than we wish. Economists study how people make decisions about buying and selling, and saving and investing.
Question 314
If there are implicit costs of production
A. Economic profit will be equal to accounting profit
B. Economic profit will be less than accounting profit
C. Economic profits will be zero
D. Economic profit will be more than accounting profit.
View Answer
Answer: Option B
Explanation:
If there are implicit costs of production Economic profit will be less than accounting profit. Economic profit is total revenue minus opportunity cost. Accounting profit is total revenue minus explicit cost. Opportunity costs are higher than explicit costs because opportunity costs also include implicit costs.
Question 315
For ____ goods, increase in income leads to increase in demand.
A. Abnormal
B. Normal
C. Inferior
D. Superior
View Answer
Answer: Option B
Explanation:
For normal goods, increase in income leads to increase in demand. Rising incomes lead to a rise in the number of goods demanded by consumers.
Question 316
In the case of a Giffen good, the demand curve will be
A. Horizontal
B. Downward to the right
C. Upward to the right
D. Vertical
View Answer
Answer: Option C
Explanation:
In the case of a Giffen good, the demand curve will be Upward to the right. A Giffen good has an upward-sloping demand curve, which is contrary to the fundamental law of demand, which states that the quantity demanded for a product falls as the price increases, resulting in a downward slope for the demand curve.
Question 317
The law of consumer surplus is based on
A. Indifference curve analysis
B. Revealed preference theory
C. Law of substitution
D. The law of diminishing marginal utility
View Answer
Answer: Option D
Explanation:
The law of consumer surplus is based on the law of diminishing marginal utility. The concept of consumer surplus is derived from the law of diminishing marginal utility. As per the law, as we purchase more of a commodity, its marginal utility reduces. Since the price is fixed, for all units of the goods we purchase, we get extra utility. This extra utility is consumer surplus.
Question 318
An isoquant slopes
A. Downward to the left
B. Downward to the right
C. Upward to the right
D. Upward to the left
View Answer
Answer: Option B
Explanation:
An isoquant slopes downward to the right. This implies that the Isoquant is a negatively sloped curve. This is because when the quantify of factor K (capital) is increased, the quantity of L (labor) must be reduced so as to keep the same level of output.
Question 319
If the price of 'X' rises by 10 percent and the quantity demanded falls by 10 percent, 'X' has
A. Inelastic demand
B. Unitarily elastic demand
C. Zero elastic demand
D. Elastic demand
View Answer
Answer: Option B
Explanation:
If the price of 'X' rises by 10 percent and the quantity demanded falls by 10 percent, 'X' has Unitarily elastic demand.
Question 320
Demand for final consumption arises in
A. Household sector only
B. Government sector only
C. Both household and government sector
D. Neither household nor government sector
View Answer
Answer: Option C
Explanation:
Demand for final consumption arises in both household and government sector. In the basic two- sector circular flow of income model, the economy consists of two sectors: (1) households and (2) firms.
Question 321
Demand for intermediate consumption arises in
A. Household sector only
B. Government sector only
C. Corporate sector only
D. All producing sectors of the economy
View Answer
Answer: Option D
Explanation:
Demand for intermediate consumption arises in all producing sectors of the economy. Intermediate consumption is a national accounts concept which measures the value of the goods and services consumed as inputs by a process of production.
Question 322
When as a result of decrease in price of good, the total expenditure made on it decreases we say that price elasticity of demand is
A. Less than unity
B. Unity
C. Zero
D. Greater than Unity
View Answer
Answer: Option A
Explanation:
When as a result of decrease in price of good, the total expenditure made on it decreases we say that price elasticity of demand is less than unity.
Question 323
The second glass of lemonade gives lesser satisfaction to a thirsty biy, this is a clear case of
A. Law of demand
B. Law of diminishing returns
C. Law of diminishing marginal utility
D. Law of supply
View Answer
Answer: Option C
Explanation:
The second glass of lemonade gives lesser satisfaction to a thirsty boy, this is a clear case of Law of diminishing marginal utility. The law of diminishing marginal utility describes a familiar and fundamental tendency of human behavior.
Question 324
The structure of the cold drink industry in India is best described as
A. Perfectly competitive
B. Monopoly
C. Oligopoly
D. Monopolistically competitive
View Answer
Answer: Option D
Explanation:
The structure of the cold drink industry in India is best described as monopolistically competitive. Monopolistic competition is a market structure in which there are many firms selling differentiated products.
Question 325
The kinked demand curve model of oligopoly assumes that
A. Response to a price increase is less than the response to a price decrease
B. Response to a price increase is more than the response to a price decrease
C. Elassticity of demand is constant regardless of whether price increases or decreases
D. Elasticity of demand is perfectly elastic if price increases and perfectly inelastic if price decreases
View Answer
Answer: Option A
Explanation:
The kinked demand curve model of oligopoly assumes that response to a price increase is less than the response to a price decrease. In an oligopolistic market, the kinked demand curve hypothesis states that the firm faces a demand curve with a kink at the prevailing price level. The curve is more elastic above the kink and less elastic below it. This means that the response to a price increase is less than the response to a price decrease.
Question 326
Under which market structure, average revenue of a firm is equal to its marginal revenue
A. Oligopoly
B. Monopoly
C. Perfect competition
D. Monopolistic competition
View Answer
Answer: Option C
Explanation:
Under Perfect competition market structure, average revenue of a firm is equal to its marginal revenue. For a perfectly competitive firm, average revenue is not only equal to price, but more importantly, it is equal to marginal revenue, all of which are constant.
Question 327
Agricultural goods market depicts characteristics close to
A. Perfect competition
B. Oligopoly
C. Monopoly
D. Monopolistic competition
View Answer
Answer: Option A
Explanation:
Agricultural goods market depicts characteristics close to Perfect competition. A perfectly competitive market has the following characteristics: There are many buyers and sellers in the market. Each company makes a similar product. Buyers and sellers have access to perfect information about price.
Question 328
In economics, what a consumer is ready to pay minus what he actually pays, is termed as
A. Consumer's equilibrium
B. Consumer's surplus
C. Consumer's expenditure
D. None of the above
View Answer
Answer: Option B
Explanation:
In economics, what a consumer is ready to pay minus what he actually pays, is termed as Consumer's surplus. Consumer surplus is defined as the difference between the consumers' willingness to pay for a commodity and the actual price paid by them, or the equilibrium price.
Question 329
A firm's average total cost of production is Rs.300 at 5 units of output and Rs.320 at 6 units of output. The marginal cost of producing the 6th unit is
A. Rs.20
B. Rs.120
C. Rs.320
D. Rs.420
View Answer
Answer: Option D
Explanation:
The answer is Total cost for producing 5 units = 300 x 5 = 1500.Total cost for producing 6 units = 320 x 6 = 1920Therefore, Marginal cost for producing the 6th unit = 1920-1500 = 420.This is a mathematical part that is used for the calculation of economics. At the same time, this also talks about production, and average rate of per unit. Wlso, the marginal cost involved for the total production is also taken into account.
Question 330
The producer is in equilibrium at a point where the cost line is
A. Above the isoquant
B. Below the isoquant
C. Cutting the isoquant
D. Tangent to isoquant
View Answer
Answer: Option D
Explanation:
The producer is in equilibrium at a point where the cost line is Tangent to isoquant.
Question 331
The various combination of goods that can be produced in any economy when it uses its available resources and technology efficiency are depicted by
A. Demand curve
B. Production curve
C. Supply curve
D. Production possibility curve
View Answer
Answer: Option D
Explanation:
The various combination of goods that can be produced in any economy when it uses its available resources and technology efficiency are depicted by Production possibility curve. A production possibility frontier (PPF) shows the maximum possible output combinations of two goods or services an economy can achieve when all resources are fully and efficiently employed.
Question 332
Rational decision making requires that
A. One's choices be arrived at logically and without errors
B. One's choices be consistent with one's goals
C. One's choices never vary
D. One makes choices that do not involve trade offs
View Answer
Answer: Option B
Explanation:
Rational decision making requires that One's choices be consistent with one's goals. Rational choice theory, also called rational action theory or choice theory, school of thought based on the assumption that individuals choose a course of action that is most in line with their personal preferences.
Question 333
If the demand for a good is inelastic, an increase in the price of the good will cause the total expenditure of the consumers of the good to
A. Remain the same
B. Increase
C. Decrease
D. Any of the above
View Answer
Answer: Option B
Explanation:
If the demand for a good is inelastic, an increase in the price of the good will cause the total expenditure of the consumers of the good to Increase.
Question 334
All of the following are determinants of demand except
A. Tastes and preferences
B. Quantity supplied
C. Income
D. Price of related goods
View Answer
Answer: Option B
Explanation:
All of the following are determinants of demand except Quantity supplied. The Five Determinants of Demand Prices of related goods or services. These are either complementary, those purchased along with a particular good or service, or substitutes, those purchased instead of a certain good or service. Tastes or preferences of consumers. Expectations.
Question 335
A firm's average fixed cost is Rs.20 at 6 units of output. What will it be at 4 units of output?
A. Rs.60
B. Rs.30
C. Rs.40
D. Rs.20
View Answer
Answer: Option B
Explanation:
Average fixed cost per unit is Rs. 20 when 6 units of product produced.Total fixed cost = 6 X 20 = Rs. 120.Therefore fixed cost per unit when production is 4 units = 120/4 = Rs.30
Question 336
If the price of good A increases relative to the price of substitutes B and C, the demand for
A. B will increase
B. C will increase
C. Both B and C will increase
D. B and C will decrease
View Answer
Answer: Option C
Explanation:
If the price of good A increases relative to the price of substitutes B and C, the demand for Both B and C will increase.
Question 337
If income elasticity for a good is 2, then it is a
A. Necessity item
B. Inferior good
C. Luxury item
D. Comfortable item
View Answer
Answer: Option C
Explanation:
If income elasticity for a good is 2, then it is a Luxury item. A positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in demand.
Question 338
Lesser production of ____ would lead to lesser production in future.
A. Public goods
B. Consumer goods
C. Capital goods
D. Agricultural goods
View Answer
Answer: Option C
Explanation:
Lesser production of Capital goods would lead to lesser production in future. Production of both capital and consumer goods is essential for the economy. Capital goods (like plant and machinery) are needed for further production and future growth. Consumer goods are needed for present consumption.
Question 339
The average total cost pf producing 50 units is Rs.250 and total fixed cost is Rs.1000. What is the average fixed cost of producing 100 units?
A. Rs.10
B. Rs.30
C. Rs.20
D. Rs.5
View Answer
Answer: Option A
Explanation:
Average Fixed Cost = Total Fixed Cost / Number of Units. AFC = 1000/100 = Rs. 10.
Question 340
In perfect competition, the firm's _____ above AVC has the identical shape of the firm's supply curve
A. Marginal revenue curve
B. Marginal cost curve
C. Average cost curve
D. None of the above
View Answer
Answer: Option B
Explanation:
In perfect competition, the firm's Marginal cost curve above AVC has the identical shape of the firm's supply curve. Under perfect competition average revenue is equal to marginal revenue, so the firm will produce up to that point where marginal revenue and marginal cost are equal. Short run supply curve of a perfectly competitive firm is that portion of marginal cost curve which is above average variable cost curve.
Question 341
Under Marginal utility analysis, utility is assumed to be a
A. Cardinal concept
B. Ordinal concept
C. Indeterminate concept
D. None of the above
View Answer
Answer: Option A
Explanation:
Under Marginal utility analysis, utility is assumed to be a Cardinal concept. The Cardinal Utility approach is propounded by neo-classical economists, who believe that utility is measurable, and the customer can express his satisfaction in cardinal or quantitative numbers, such as 1,2,3, and so on.
Question 342
Suppose the total cost of producing commodity X is Rs.125000. Out of this cost, implicit cost is Rs.35000 and normal profit is Rs.25000. What will be the explicit cost of commodity X?
A. Rs.90000
B. Rs.65000
C. Rs.60000
D. Rs.100000
View Answer
Answer: Option B
Explanation:
125000-25000-35000 = 65000 = explicit cost.Total cost = implicit cost + explicit cost.
Question 343
When indifference curve is L shaped, then two goods will be
A. Perfect substitute goods
B. Substitute goods
C. Perfect complementary goods
D. Complementary goods
View Answer
Answer: Option C
Explanation:
If two goods are perfect complements then the indifference curves will be L-shaped.
Question 344
The 'substitution effect' takes place due to change in
A. Income of the consumers
B. Prices of the commodity
C. Relative prices of the commodities
D. All of the above
View Answer
Answer: Option C
Explanation:
The 'substitution effect' takes place due to change in Relative prices of the commodities. The substitution effect refers to the change in demand for a good as a result of a change in the relative price of the good in terms of other goods.
Question 345
One characteristic not typical of oligopolistic industry is
A. Too much importance to non-price competition
B. Price leadership
C. Horizontal demand curve
D. A small number of firms in the industry
View Answer
Answer: Option C
Explanation:
One characteristic not typical of oligopolistic industry is Horizontal demand curve. The horizontal demand curve indicates that the elasticity of demand for the good is perfectly elastic. This means that if any individual firm charged a price slightly above market price, it would not sell any products.
Question 346
The degree of monopoly power is measured in terms of difference between
A. Marginal cost and the price
B. Marginal cost and average revenue
C. Marginal cost and average cost
D. Marginal revenue and average cost
View Answer
Answer: Option A
Explanation:
The degree of monopoly power is measured in terms of difference between Marginal cost and the price. In a perfectly competitive market, price equals marginal cost and firms earn an economic profit of zero. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit.
Question 347
In case of inferior goods, the income elasticity is
A. Zero
B. Positive
C. Negative
D. None
View Answer
Answer: Option C
Explanation:
In case of inferior goods, the income elasticity is Negative. A negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a fall in the demand and may lead to changes to more luxurious substitutes.
Question 348
If all inputs are trebled and the resultant output is doubled, this is a case of
A. Constant returns to scale
B. Increasing returns to scale
C. Diminishing returns to scale
D. Negative returns to scale
View Answer
Answer: Option C
Explanation:
If all inputs are trebled and the resultant output is doubled, this is a case of Diminishing returns to scale.
Question 349
Demand curve can be derived from
A. MU curve
B. PCC
C. Both 'a' and 'b'
D. None
View Answer
Answer: Option C
Explanation:
Demand curve can be derived from MU curve and PCC. Marginal utility and the law of diminishing marginal utility can be used to provide insight into market demand, the law of demand, and the demand curve. Downward-sloping price consumption curve for a good means that demand for the good is elastic, upward-sloping price consumption curve means that demand for the good is inelastic and horizontal straight-line price consumption curve means that demand for the good is unit elastic.
Question 350
Discriminating monopoly is possible if two markets have
A. Rising cost curves
B. Rising and declining cost curves
C. Different elasticity of demand
D. Equal elasticity of demand
View Answer
Answer: Option C
Explanation:
Discriminating monopoly is possible if two markets have different elasticity of demand. Price discrimination is possible only when the buyers from different sub-markets are willing to purchase the same product at different prices. If the elasticity of demand is the same, then the effect of the price change on the buyer will be identical too.
Question 351
The exception to law of demand is
A. Veblen goods
B. Giffen goods
C. Both 'a' and 'b'
D. None
View Answer
Answer: Option C
Explanation:
The exception to law of demand is Veblen goods and Giffen goods. Giffen goods are the inferior goods whose demand increases with the increase in its prices. There are several inferior commodities, much cheaper than the superior substitutes often consumed by the poor households as an essential commodity. Whenever the price of the Giffen goods increases its quantity demanded also increases because, with an increase in the price, and the income remaining the same, the poor people cut the consumption of superior substitute and buy more quantities of Giffen goods to meet their basic needs. Another exception to the law of demand is given by the economist Thorstein Veblen, who proposed the concept of “Conspicuous Consumption.” According to Veblen, there are a certain group of people who measure the utility of the commodity purely by its price, which means, they think that higher priced goods and services derive more utility than the lesser priced commodities.
Question 352
Consumer's surplus left with the consumer under price discrimination is
A. Maximum
B. Minimum
C. Zero
D. Not predictable
View Answer
Answer: Option C
Explanation:
Consumer's surplus left with the consumer under price discrimination is Zero.
Question 353
The upper portion of the kinked demand curve is relatively
A. More inelastic
B. More elastic
C. Less elastic
D. Inelastic
View Answer
Answer: Option B
Explanation:
The upper portion of the kinked demand curve is relatively more elastic. The kinked-demand curve is a demand curve comprised of two segments, one that is relatively more elastic, which results if a firm increases its price, and the other that is relatively less elastic, which results if a firm decreases its price. These two segments are joined at a corner or "kink."
Question 354
In short run, a firm in monopolistic competition
A. Always earns profits
B. Incurs losses
C. Earns normal profit only
D. May earn normal profit, super normal profit or incur losses
View Answer
Answer: Option D
Explanation:
In short run, a firm in monopolistic competition may earn normal profit, super normal profit or incur losses. In the short run, a monopolistically competitive firm maximizes profit or minimizes losses by producing that quantity that corresponds to when marginal revenue = marginal cost. If average total cost is below the market price, then the firm will earn an economic profit.
Question 355
In long-run, all firms in monopolistic competition
A. Earn supernormal profits
B. Earn normal profits
C. Incur losses
D. May earn normal profit, super normal profit or incur losses
View Answer
Answer: Option B
Explanation:
In long-run, all firms in monopolistic competition earn normal profits. In the long‐run, the competition brought about by the entry of new firms will cause each firm in a monopolistically competitive market to earn normal profits, just like a perfectly competitive firm.
Question 356
In a perfectly competitive market
A. Firm is the price giver and industry the price taker
B. Firm is the price taker and industry the price giver
C. Both are price takers
D. None of the above
View Answer
Answer: Option B
Explanation:
In a perfectly competitive market firm is the price taker and industry the price giver. A perfectly competitive firm would be characterized as a "price taker" due to its inability to influence market price. In a perfectly competitive market, the price of the products are fixed since each firm is producing just enough to stay in business.
Question 357
If the price of Pepsi decreases relative to the price of Coke and 7-Up, the demand for
A. Coke will rise
B. 7-Up will decrease
C. Coke and 7-Up will increase
D. Coke and 7-Up will decrease
View Answer
Answer: Option D
Explanation:
If the price of Pepsi decreases relative to the price of Coke and 7-Up, the demand for Coke and 7-Up will decrease. A decrease in the price of a good normally results in an increase in the quanti ty demanded by consumers because of the law of demand, and conversel y, quant ity demanded decreases when price rises. So. here the decrease in price of Pepsi will increase in demand for it, while the demand for Coke and 7-Up will decrease because of no change in their price level.
Question 358
Price discrimination is not possible in case of
A. Perfect competition
B. Monopoly
C. Monopolistic competition
D. Oligopoly
View Answer
Answer: Option A
Explanation:
Price discrimination is not possible in case of Perfect competition. Price discrimination is not possible under perfect competition, even if the two markets could be kept separate. Since market demand in each market is perfectly elastic, every seller would try to sell in that market in which could get the highest price. Competition would make the price equal in both the markets. However, price discrimination is possible and profitable only when markets are imperfect.
Question 359
If the income elasticity is greater than one, the commodity is
A. Necessity item
B. Luxury item
C. Inferior good
D. None
View Answer
Answer: Option B
Explanation:
If the income elasticity is greater than one, the commodity is Luxury item. Luxury goods represent normal goods associated with income elasticities of demand greater than one. Consumers will buy proportionately more of a particular good compared to a percentage change in their income.
Question 360
The 'Diamond water' controversy is explained by
A. Total utility
B. Marginal utility
C. Price offered
D. Quantity supplied
View Answer
Answer: Option B
Explanation:
The 'Diamond water' controversy is explained by marginal utility. Marginal utility is the additional satisfaction or gain someone gets from using or purchasing an additional unit of a particular good or service. People are willing to pay a higher price for goods with greater marginal utility. So, let's go back to water and diamonds. There is plenty of water in most parts of the world (not scarce), which means that, as consumers, we usually have a low marginal utility for water. In a typical situation, we aren't willing to pay a lot of money for one more drink of water. Diamonds, however, are scarce. Because they are harder to find and attain, our marginal utility (additional satisfaction), for adding a diamond to our collection is much higher than someone offering us one more drink of water. If one is dying of thirst, then this paradox might not make sense, and the marginal utility from another drink of water would be much higher than the additional satisfaction of owning a diamond.
Question 361
Which of the following are sources of growth?
A. Natural resources
B. Human capital
C. Physical capital
D. All of the above
View Answer
Answer: Option D
Explanation:
Natural resources, Human capital and Physical capital all are sources of growth.
Question 362
The IC curve approach assumes
A. Rationality
B. Consistency
C. Transitivity
D. All of the above
View Answer
Answer: Option D
Explanation:
The IC curve approach assumes Rationality, Consistency and Transitivity.
Question 363
A higher indifference curve shows
A. A higher level of satisfaction
B. A higher level of production
C. A higher level of income
D. None of the above
View Answer
Answer: Option A
Explanation:
A higher indifference curve shows a higher level of satisfaction. A higher indifference curve will represent a higher level of satisfaction than a lower indifference curve. In other words, the combinations which lie on a higher indifference curve will be preferred to the combinations which lie on a lower indifference curve.
Question 364
In the case of two perfect substitutes, the indifference curve will be
A. Straight line
B. L-shaped
C. U-shaped
D. C-shaped
View Answer
Answer: Option A
Explanation:
In the case of two perfect substitutes, the indifference curve will be Straight line. This is because perfect substitutes have a fixed ratio of substitution. An indifference curve is usually concave towards the origin because the two goods are usually not perfect substitutes. This means that the exchange rate varies hence the slope of the line tangent to the curve (exchange rate) varies.