1000+ Basics of Economics MCQ for DRDO [Solved]

1. Indifference curve approach (ordinal approach) is superior to utility approach (cardinal approach) because:
A. In ordinal approach we can separate the income effect from the substitution effect of a price change
B. In ordinal approach we can study the consumer behavior more closely
C. In ordinal approach the consumer is assumed more rational
D. In ordinal approach the consumer has more income
Answer : A

2. In case of monopoly, when total revenue is maximum:
A. MR is positive
B. MR falls
C. MR rises
D. MR is zero
Answer : D

3. The fundamental choices that a society must make about the use of its resources include:
A. How much to produce
B. How to produce
C. How to distribute
D. All of the above
Answer : D

4. The cobweb model will convergent when the slope of:
A. Demand curve is more than supply curve
B. Supply curve is more than demand curve
C. Supply curve is equal to demand curve
D. None of the above
Answer : A

5. Price discrimination is possible:
A. When elasticities of demand in different markets are the same at the ruling price
B. When elasticities of demand are different in different markets at the ruling price
C. When elasticities cannot be known
D. When elasticities of demands are zero in different markets at the rulling price
Answer : B

6. A demand schedule is shown as:
A. A function of price alone
B. A result of change in tastes
C. A result of increase in the size of the family
D. None of the above
Answer : A

7. An economic theory is :
A. An axiom
B. A proposition
C. A hypothesis
D. A tested hypothesis
Answer : D

8. Labor theory was firstly rejected by:
A. Adam Smith
B. Karl Marx
C. Ricardo
D. Pigou
Answer : B

9. The demand curve of giffen goods will be:
A. Negatively sloped
B. Positively sloped
C. Parallel to X-axis
D. None of the above
Answer : B

10. Pure monopoly exists:
A. When there is a single producer
B. When there is a single producer without any close substitute
C. When there is a single producer with close substitutes
D. When a few producers control the industry
Answer : B

11. The demand of the luxuries is:
A. More elastic
B. Less elastic
C. Unit elastic
D. Zero elastic
Answer : A

12. When with a change in price the total outlay (expenditures) on a commodity remains constant, it is a case of:
A. Perfect elasticity (infinitely elastic)
B. Perfect inelasticity (zero elasticity)
C. Unit elasticity
D. Zero elasticity (infinitely inelastic)
Answer : C

13. The average fixed cost (AFC) curve is asymptote to:
A. X-axis
B. Y-axis
C. Z-axis
D. None of the above
Answer : A

14. Identify the work of Irving Fisher:
A. Policy on trade
B. Policy against inflation
C. The making of index numbers
D. Labor theory
Answer : C

15. Which of the following models are associated with non-collusive oligopoly?
A. Bertrand model
B. Chamberlin model
C. Kinked demand model (Sweezy Model)
D. All of the above
Answer : D

16. Price elasticity of demand can be measured in the following way:
A. Percentage change in quantity demanded of a commodity divided by percentage change in price of that commodity
B. Change in quantity demanded of a commodity divided by change in price of that commodity
C. Percentage change in price of a commodity divided by percentage change in quantity demanded of that commodity
D. None of that commodity
Answer : A

17. A maximin strategy:
A. Maximizes the minimum gain that can be earned
B. Maximizes the gain of one player, but minimizes the gain of the opponent
C. Minimizes the maximum gain that can be earned
D. None of the above
Answer : A

18. Price effect occurs on the higher IC in case of:
A. Slutsky approach
B. Hicksian approach
C. Marshallian approach
D. None of the above
Answer : A

19. Excess capacity is not found under:
A. Monopoly
B. Monopolistic competition
C. Perfect competition
D. Oligopoly
Answer : C

20. If the price of coffee increases, you would predict that:
A. Demand curve for sugar will shift downward (leftward)
B. Supply curve for sugar will shift leftward (upward)
C. Demand curve for bread will shift downward (leftward)
D. None of the above
Answer : A

21. Which of the following is not a property of indifference curve?
A. Convex to the origin
B. Slopes downwards to the right
C. Parallel to each other
D. Cannot intersect each other
Answer : C

22. Moving down along a linear demand curve:
A. Demand becomes less elastic
B. Elasticity does not change
C. Demand has unitary elasticity
D. Demand becomes more elastic
Answer : A

23. The slope of isocost line (budget line) shows:
A. Capital labor ratio
B. Labor wage ratio
C. Factor price ratio
D. Factor labor ratio
Answer : C

24. The basic and essential economic problems in a community are related to choice and:
A. Freedom
B. Scarcity
C. Social class
D. Politics
Answer : B

25. A decrease in demand lowers the price the most:
A. In the immediate run
B. In the short run
C. When the supply is perfectly elastic
D. When producers have sufficient time to fully adjust to the demand change
Answer : A

26. A typical demand curve cannot be:
A. Convex to the origin
B. Concave to the origin
C. A straight line
D. Rising upwards to the right
Answer : D

27. Utility is a function of:
A. Price
B. Quantity
C. Supply
D. Demand
Answer : B

28. If money income is given then consumer is in equilibrium when:
A. MU < P
B. MU >P
C. MU = P
D. MU = 0
Answer : C

29. In economics, Externality means:
A. An externality is a cost or benefit which is not transmitted through prices
B. An externality is a cost or benefit which is transmitted through prices
C. An externality is a production received through external resources
D. None of the above
Answer : A

30. Of the following commodities, which has the lowest price-elasticity of demand?
A. Car
B. Salt
C. Tea
D. House
Answer : B

31. According to translog production function, elasticity of substitution is:
A. Greater than one
B. Less than one
C. Zero
D. Equal to one
Answer : D

32. In first degree price discrimination, monopolist takes away :
A. All of the consumer surplus
B. All of the producer surplus
C. Some part of the consumer surplus
D. None of them
Answer : A

33. Market allocation fundamentally relies upon:
A. A system of relative prices
B. A belief that employees work for the good of society
C. Government ownership of the means of production
D. Moral incentives to encourage productive efficiency
Answer : A

34. Law of Returns to Scale shows:
A. Technical relationship between input of a variable factor and the resulting output
B. Any economic relationship between input and output
C. An output maximizing relationship
D. A relationship with input changing and corresponding changes in output
Answer : A

35. Under Bandwagon effects, people use those goods which are used by their:
A. Friends
B. Relatives
C. Family
D. All of them
Answer : D

36. The cost of production is faced by a:
A. Producer
B. Consumer
C. Seller
D. Firm
Answer : D

37. Which describes a competitive market?
A. Many buyers and many sellers
B. One seller, many buyers
C. One buyer, many sellers
D. Few sellers, many buyers
Answer : A

38. In non-constant sum game (non-zero sum game), if there are two parties then:
A. Both parties make better-off
B. Both parties make worse-off
C. Both parties become Neutral
D. Both parties can become better off or worse off
Answer : D

39. The budget constraint can be written as:
A. X.PX + Y.PY = 1
B. X.PX + Y.PY < 1
C. X.PX + Y.PY > 1
D. X.PX + Y.PY = 0
Answer : A

40. Micro economics is concerned with:
A. Product markets
B. Factor markets
C. Supply and demand
D. a, b and c
Answer : D

41. A firm in a position of equilibrium is supposed to be maximizing:
A. Output
B. Sales
C. Profits
D. None of the above
Answer : C

42. The main contribution of Malthus is in the field of:
A. Consumption expenditure
B. Theory of population
C. Division of labor
D. Theory of demand
Answer : B

43. Price elasticity of demand is best defines as:
A. Change in the tastes of consumers at different prices
B. The rate of response of demand to a change in supply
C. The change in costs when output is increased by one unit
D. The responsiveness of demand to a change in price
Answer : D

44. The Law of Diminishing Marginal Returns can be explained in terms of:
A. Economies and diseconomies of production
B. Indivisibility of factors
C. Fixity of supply of land
D. Variable factor productivity
Answer :

45. For a few products such as insulin for diabetics,:
A. The demand curve can be upward sloping
B. The price elasticity of demand could be zero
C. The price elasticity of demand could be greater than one
D. None of the above
Answer : B

46. In dominant price leadership model, the small firms are like:
A. monopolistic firms
B. monopoly
C. competitive firms
D. none of the above
Answer : C

47. The game theory is concerned with:
A. Perfect competition
B. Imperfect competition
C. Price discrimination
D. Duopoly and oligopoly
Answer : D

48. 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
Answer : B

49. The total utility is gained by consuming:
A. The last unit of a good
B. All the units of a good
C. The first unit of a good
D. The average unit of a good
Answer : B

50. The expansion point is attained by joining:
A. Similar optimal combinations
B. Different optimal combinations
C. Both of them
D. None of them
Answer : B