1000+ Basics of Economics MCQ for GRE [Solved]

1. The greater the percentage of income spent on a commodity:
A. The greater its elasticity is likely to be
B. The weaker its elasticity is likely to be
C. The unchanged its elasticity is likely to be
D. None of the above
Answer : A

2. In joint-profit maximization cartel, the distribution of profit is:
A. Made by agency
B. Not made by agency
C. Made by people
D. None of the above
Answer : A

3. Which of the following is the work of A.C.Pigou?
A. Economics of Welfare
B. Commerce and Trade
C. Industrial Economics
D. None of the above
Answer : A

4. In the case of complements, the cross demand curve slopes:
A. Downwards to the right
B. Upwards to the right
C. Backwards to the top
D. Inwards at the bottom
Answer : A

5. Which of the following is an implicit cost of production?
A. Wages of the labor
B. Charges of electricity
C. Interest on owned money capital
D. Payment for raw materials
Answer : C

6. An increase in the supply of a commodity is caused by:
A. Improvements in its technology
B. Fall in the prices of other commodities
C. Fall in the prices of factors of production
D. All of the above
Answer : D

7. The firm in cournot model:
A. face costs
B. face taxes
C. donot face taxes
D. donot face costs
Answer : D

8. In case the two commodities are complements, cross elasticity will be:
A. Positive
B. Unitary
C. Negative
D. Infinite
Answer : C

9. 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

10. If a ten percent increase in price causes a ten percent reduction in quantity demanded, elasticity of demand is:
A. Perfectly elastic
B. Elastic
C. Unitary elastic
D. Inelastic
Answer : C

11. Which of the following theories of trade cycle was presented by William Jevons?
A. Sunspot Theory
B. Monetary Theory
C. Saving-Investment Theory
D. Innovation Theory
Answer : A

12. In Prisoners Dillemma, the players are:
A. Industrialists
B. Prisoners
C. Common men
D. Workers
Answer : B

13. The external economies of scale experienced by a firm include the:
A. Growth of firms processing its waste materials
B. Development of research bureau serving the industry
C. Supply of suitable skilled labor in the area
D. All of the above
Answer : D

14. In the case of two factor inputs which are neither perfectly complementary nor perfect substitutes, the iso-product curve will be:
A. A downward sloping straight line
B. A downward sloping curve
C. An upward rising curve
D. Right angled iso-quants
Answer : B

15. While buying two goods X and Y with unequal prices, to maximize total utility from his income, a consumer should get:
A. Equal MU from both commodities X and Y
B. More MU from commodity X than from commodity Y
C. More MU from commodity Y than from commodity X
D. Equal marginal utility from the last rupee spent on commodity X and commodity Y
Answer : D

16. Under conditions of perfect competition, price in the long-run is equal to:
A. Minimum of average variable cost
B. Minimum of marginal cost
C. Minimum of average fixed cost
D. Minimum of average cost
Answer : D

17. In second 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 : C

18. According to Marginalists, the price of any commodity is determined by:
A. Marginal usefulness
B. Marginal cost
C. Both of them
D. None of them
Answer : C

19. In joint-profit maximization cartel, central agency sets the:
A. Output
B. Input
C. Demand
D. Price
Answer : D

20. We get constant returns to scale when:
A. a = ½
B. � = ½
C. Both of them
D. None of them
Answer : C

21. The kinked demand curve comes into being where:
A. Proportional demand curve (PDC) and individual demand curve (IDC) intersect each other
B. Proportional demand curve (PDC) and individual demand curve (IDC) are parallel to each other
C. Proportional demand curve (PDC) and individual demand curve (IDC) repel each other
D. None of the above
Answer : A

22. According to Marshal, the Law of Diminishing Marginal Utility:
A. Applies on both money and other commodities
B. Doe not apply on money
C. Does not apply on bank money but applies on cash money
D. Applies on all the commodities except on money
Answer : A

23. When total product (TP) is maximum:
A. MP is negative
B. MP is infinite
C. MP is zero
D. None of the above
Answer : C

24. 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

25. LMC represents change in LTC (long-run total cost) due to producing an additional unit of a good while the fixed and variable factors:
A. Cannot be changed
B. Can be changed
C. Can partially be changed
D. None of the above
Answer : B

26. The firm producing at the minimum point of the AC curve is said to be:
A. Operating under diminishing cost
B. Making optimum use of plant capacity
C. Operating at excess capacity
D. Operating under increasing costs
Answer : B

27. Who is the founder of classical school of thought?
A. David Ricardo
B. Adam Smith
C. T.R.Malthus
D. J.S.Mill
Answer : B

28. Income effect operates through an increase
A. In nominal income
B. In money income
C. In wages
D. In real income because of the fall of price of a commodity
Answer : D

29. 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

30. The CES production function shows:
A. Decreasing return to scale
B. Increasing return to scale
C. Constant return to scale
D. None of the above
Answer : C

31. Average cost curve contains in it:
A. Normal profits
B. No normal profits
C. Sometimes normal profits and sometimes no normal profits
D. Super normal profits
Answer : A

32. To calculate the Economic Profit we must deduct which of the following cost from our total revenues?
A. Opportunity cost
B. Direct cost
C. Rent cost
D. Wage cost
Answer : A

33. The Purchasing Power Parity (PPP) Theory is presented by:
A. J.M.Keynes
B. E.D.Domar
C. Adam Smith
D. Gustav Cassel
Answer : D

34. 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

35. In monopolistic competition, the firms follow:
A. Exotic behavior
B. Sympathetic behavior
C. Myopia behavior
D. Regular behavior
Answer : C

36. Monopolistic firm can fix:
A. Both price and output
B. Either price or output
C. Neither price nor output
D. None of the above
Answer : B

37. An indifferent curve shows:
A. That how many utils are obtained from consuming different bundles of commodities
B. Different collections of two commodities the consumer considers to be of equal value
C. That if price increases there will be an increases in demand
D. None of the above
Answer : B

38. In Nash equilibrium, a player:
A. Deviates from his strategy
B. Does not deviate from his strategy
C. Does not think in a good way
D. None of the above
Answer : B

39. The arc elasticity is the measure of average elasticity at the mid-point of the chord and connects:
A. Two points on demand curve
B. Two points on supply curve
C. Many points on demand curve
D. Many points on demand curve
Answer : A

40. According to law of Equi-Marginal Utility when price of commodity falls then we bought:
A. More units
B. Less units
C. Same units
D. Zero units
Answer : A

41. Normal profits are considered as:
A. Explicit costs
B. Implicit costs
C. Social costs
D. Private cost
Answer : B

42. Income-elasticity of demand is expressed as:
A. % change in quantity demanded % change in income
B. % change in income % change in quantity demanded
C. Change in income Change in quantity demanded
D. None of the above
Answer : A

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

44. Indifference curves are downward sloping and are drawn bowed toward the origin (convex to the origin) implying:
A. Consumers prefer to have less satisfaction than more of both commodities
B. As more and more of one commodity is obtained, less and less of the other must be given u to keep satisfaction constant
C. The total satisfaction obtained along an indifference curve decreases at an increasing rate
D. None of the above
Answer : B

45. 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

46. Total variable cost curve:
A. Steps downwards at first and then upwards
B. Steps upwards, then remains constant and then falls
C. Steps downwards
D. None of the above
Answer : A

47. Human wants are:
A. Thousands
B. Few
C. Innumerable
D. Hundreds
Answer : C

48. At a point where a straight line demand curve meets the price axis (Y-axis), the elasticity of demand is:
A. Equal to one
B. Less than one
C. Equal to zero
D. Equal to infinite
Answer : D

49. Of the following, which one is a characteristic of monopolistic competition?
A. Standardized product
B. Differentiate product
C. Two firms
D. No entry
Answer : B

50. The word ECONOMICS is derived from the Greek terms meanings:
A. Political economy
B. Household Management
C. Production and consumption
D. Financial Accounting
Answer : B