1000+ Basics of Economics MCQ for ESIC [Solved]

1. When at a given price, the quantity demanded of a commodity is more than the quantity supplied, there will be:
A. An upward pressure on price
B. A downward pressure on price
C. Price will remain unaffected
D. All of the above
Answer : A

2. The goods sold by firms under monopolistic competition are technological as well as:
A. Economic complements
B. Economic substitutes
C. Economic inferiors
D. None of the above
Answer : B

3. Cross-elasticity of demand or cross-price elasticity between two complements will be:
A. Negative
B. Positive
C. Infinite
D. Zero
Answer : A

4. Change in quantity demanded refers to:
A. Upward shift of the demand curve
B. Downward shift of the demand curve
C. Movement on the same demand curve
D. None of the above
Answer : C

5. The income effect means that consumer purchase more when:
A. Price falls
B. Price increases
C. Price is unchanged
D. Taste changed
Answer : A

6. In monopolistic competition (also in kinked demand curve model), a firm sells the amount where:
A. Individual demand curve (IDC) is equal to proportional demand curve (PDC)
B. Individual demand curve (IDC) is greater than proportional demand curve (PDC)
C. Individual demand curve (IDC) is less than proportional demand curve (PDC)
D. None of the above
Answer : A

7. Excess capacity is concerned with the:
A. V-shaped traditional cost curves
B. S-shaped traditional cost curves
C. Modern cost curves
D. U-shaped traditional cost curves
Answer : D

8. The Modern and Neo-Keynsian Theory of Interestwas presented by:
A. Gunner Myrdal
B. A.C.Pigou
C. J.M.Keynes
D. J.R.Hicks
Answer : D

9. Duopoly is a market where there are:
A. Two sellers
B. A few sellers
C. Five sellers
D. Many sellers
Answer : A

10. The number of sellers in oligopoly are:
A. Two
B. Many
C. Four
D. Very few
Answer : D

11. The main objective of the firm is to:
A. Face losses
B. Avoid losses
C. Bear losses
D. Make economic decisions
Answer : D

12. The MC curve cuts the AVC and ATC curves:
A. At different points
B. At the falling parts of each
C. At their respective minimums
D. At the rising parts of each
Answer : C

13. Consumer surplus is the difference between
A. Price demanded and price paid
B. Price quoted and price actually paid
C. Price that a consumer is willing to pay and the price actually paid
D. None of the above
Answer : C

14. The giffen paradox is an exception to law of:
A. Supply
B. Demand
C. Production
D. Consumption
Answer : B

15. Which of the following conditions is met in the long-run equilibrium in monopolistic competition, where the firm is earning only normal profits?
A. MC =AC and PB. MC = AC and P=MR
C. P =MC and PD. MC=MR and P =AR= ATC
Answer : D

16. If two goods have same marginal utility for a consumer then:
A. He will consume only one of them
B. He will consume equal quantities of them
C. He will be willing to pay the same price for each of them
D. The total utility gained from each of them is equal
Answer : C

17. When at a given price, the quantity supplied of a commodity is more than the quantity demanded, there will be:
A. An upward pressure on price
B. A downward pressure on price
C. Price will remain unaffected
D. All of the above
Answer : B

18. In the short-run, the competitive firm can maximize its profits (or minimize its losses) by:
A. Equating price and marginal revenue
B. Equating price and average total cost
C. Increasing marginal cost and lowering fixed costs
D. Equating marginal cost and marginal revenue
Answer : D

19. A significant property of the Cobb-Douglas production function is that the elasticity of substitution between inputs is:
A. Greater than one
B. Less than one
C. Zero
D. Equal to one
Answer : D

20. A profit-maximizing monopolist in two separate markets will:
A. Charge the same price in both markets
B. Always charge a higher price in the market where he sells more
C. Always charge a higher price in the market where he sells less
D. Adjust his sales in the two markets so that his marginal revenue in each market just equals his aggregate marginal cost
Answer : D

21. In cournot model, at equuilibrium when MC = MR, the elasticity of demand is:
A. equal to one
B. zero
C. negative
D. equal to 2
Answer : A

23. Marginal utility is only meant for:
A. Half utility
B. Full utility
C. Additional utility
D. Multiplied utility
Answer : C

24. According to critics, the assumption of costless production is:
A. true
B. not true
C. reliable
D. deniable
Answer : B

25. In 1932, The nature and significance of economic science was written by:
A. Prof. Adam Smith
B. Prof. Alfred Marshal
C. Prof. Robbins
D. J.S.Mill
Answer : C

26. Elasticity of demand is equal to unity while marginal revenue is:
A. Positive
B. Zero
C. Negative
D. Indeterminate
Answer : B

27. In cournot model, during the process of adjustment, the number of firms:
A. Donot change
B. Change
C. Both a and b
D. None of the above
Answer : A

28. In monopolistic competition, because of difference in choices, the firm charges:
A. Different prices
B. Similar prices
C. High prices
D. Low prices
Answer : A

29. In cournot model, each firm makes decision regarding:
A. Price
B. Output
C. Cost
D. Advertisement
Answer : B

30. 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

31. The law of Diminishing Marginal Utility implies that the marginal utility of a good decreases as:
A. It gets more expensive
B. A household consumes more of it
C. Preference changes
D. A households income goes up
Answer : B

32. In perfect competition, the slope of the total revenue curve of a firm is equal to the:
A. Market price
B. AVC
C. TFC
D. AFC
Answer : A

33. The income consumption curve (ICC) is the locus of points of consumer equilibrium resulting:
A. Only when the price of commodity X changes
B. Only when the price of commodity Y changes
C. Only when the consumers income is varied
D. None of the above
Answer : C

34. In modern theory, LAC = LMC after the attainment of:
A. Maximum optimal scale
B. Average optimal scale
C. Minimum optimal scale
D. None of the above
Answer : C

35. According to Smith, by value we mean the value with respect to use, and the price we mean the value with respect to:
A. Production
B. Consumption
C. Exchange
D. Formation
Answer : C

36. A monopoly producer has:
A. Control over production but not over price
B. Control neither on production nor on price
C. Control over consumers
D. Control over production as well as over price
Answer : D

37. The production possibility curve (PPC) is concerned with:
A. Resources of the economy
B. Interests of the economy
C. Limitations of the economy
D. Qualities of the economy
Answer : A

38. The water diamond paradox was firstly resolved with the help of:
A. Labor theory of value
B. Individual theory of value
C. Producer theory of value
D. Consumer theory of value
Answer : A

39. The relationship between MC and MP shown by the marginal cost concept is:
A. Inverse
B. Direct
C. Negative
D. Positive
Answer : A

40. In case of monopoly, both AR and MR fall, but MR falls:
A. Double to that of AR
B. 1/2 to that of AR
C. 2/3 to that of AR
D. Four times to that of AR
Answer : A

41. Because the price elasticity of demand for OPEC oil is approximately .08, in order to increase revenues OPEC should:
A. Lower price in order to increase revenues
B. Lower price in order to decrease the amount of oil sold
C. Rise price in order to increase the amount of oil sold
D. Raise price in order to increase revenues
Answer : D

42. An optimum level of a firms output is:
A. Where marginal cost is minimum
B. Where average cost is minimum
C. Where both the marginal and the average cost curves are at their respective minimum
D. Where the firm earns the maximum profits
Answer : B

43. In short run, a firm can change its:
A. Total production
B. Fixed production
C. Variable production
D. None of the above
Answer : C

44. The monopolist who is producing the same output from two (or more than two) plants is concerned with:
A. Single-plant monopolist
B. Multi-plant monopolist
C. Two-plant monopolist
D. Some-plant monopolist
Answer : B

46. 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

47. 7.In an economy based on the price system the decision on what shall be produced is made by:
A. Government
B. Consumer
C. Producer
D. Stock holder
Answer : B

48. Consumers Surplus can also be defined as:
A. Extra price benefits
B. Shortage of quantity
C. Surplus of quantity
D. Difference between actual price and potential price
Answer : D

49. The difference between the average total cost and average variable cost as output increases will:
A. Increases
B. Remains the same
C. Diminishes
D. Zero
Answer : C

50. 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