1000+ Basics of Economics Multiple Choice Question Answer [Solved]

1. Under pure monopoly, there will be:
A. No distinction between firm and industry
B. One firm and no industry
C. No firm and no industry
D. None of the above
Answer : A

2. 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

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

4. The optimal strategy for a player is termed as:
A. Recessive strategy
B. Dormant strategy
C. Dominant strategy
D. Hidden strategy
Answer : C

5. Capital Saving Technological Progress can be defined as:
A. Technological progress that causes to raise the marginal product of capital and labor in the same proportion
B. Technological progress that causes the marginal product of capital to increase relative to the marginal product of labor
C. Technological progress that causes the marginal product of labor to increase relative to the marginal product of capital
D. None of the above
Answer : C

6. In monopolistic competition, the real differentiation in products is due to difference in:
A. Style
B. Consumer
C. Cost
D. Material
Answer : D

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

8. Utility means:
A. The want- satisfying power of a commodity
B. Usefulness of commodity
C. Eating of commodity
D. None of these
Answer : A

9. A high value of cross-elasticity indicates that the two commodities are:
A. Very good substitutes
B. Poor substitutes
C. Good complements
D. Poor complements
Answer : A

10. A budget line shows:
A. Price of commodity X in terms of Y
B. Price of commodity Y in term of X
C. Income of the consumer
D. All of the above
Answer : D

11. In long run competitive equilibrium:
A. Every firm will earn economic profit
B. Every firm will incur losses
C. Every firm will earn only normal profit
D. The marginal firm will earn no profit
Answer : C

12. When the consumer is in equilibrium not only his income is fully spent, but the ratio of marginal utility and price is:
A. Increased
B. Equalized
C. Prominent
D. Zero
Answer : B

13. Marginal cost is found with the help of changes in:
A. Total cost or total variable cost
B. Total explicit cost
C. Total fixed cost
D. Total implicit cost
Answer : A

14. The cost that a firm incurs in purchasing or hiring any factor of production is referred to as:
A. Explicit cost
B. Implicit cost
C. Variable cost
D. Fixed cost
Answer : A

15. Total profits are maximized at the point where:
A. TR equals TC
B. The TR curve and the TC curve intersect such that TR and TC lie at the same point
C. The TR curve and the TC curve are parallel and TC exceeds TR
D. The TR curve and the TC curve are parallel and TR exceeds TC
Answer : D

16. The amount of income left over for a consumer in equilibrium is :
A. Consumer surplus
B. Zero
C. Two rupees
D. Excess demand
Answer : B

17. In short run:
A. Labor is variable
B. Labor is fixed
C. Capital is variable
D. None of the above
Answer : A

18. In 1890, Principles of Economics was written by:
A. Prof. Robbins
B. Alfred Marshal
C. Prof. Senior
D. Adam Smith
Answer : B

19. When total product falls:
A. MP is positive
B. MP is negative
C. MP is falling
D. MP is rising
Answer : B

20. 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

21. The Chamberline model recognizes mutual:
A. Independence of firms
B. Interdependence of firms
C. Independence of individuals
D. Interdependence of materials
Answer : B

22. 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

23. The short-run supply curve of the perfectly competitive firm is given by:
A. The rising portion of its MR over and above the break-even (shut-down) point
B. The rising portion of its MC over and above the break-even (shut-down) point
C. The rising portion of its MC over and above the AC curve
D. The rising portion of its MC curve
Answer : B

24. External economies are witnessed in:
A. A rising supply curve
B. A rising demand curve
C. A falling supply curve
D. A falling demand curve
Answer : D

25. In measuring price-elasticity:
A. Price is a dependent variable and quantity is an independent variable
B. Price is an independent variable and quantity is a dependent variable
C. Price and quantity both are independent variables
D. Price and quantity both are dependent variables
Answer : B

26. Implicit costs are the costs:
A. Which are not incurred by the firm and may accrue to the community
B. Of resources the cost of factors owned by the firm
C. Of resources supplied by the household
D. Of government externalities
Answer : B

27. Production indifference curve (isoquant) is a curve which shows:
A. Equal level of output
B. Unequal level of outputs
C. Equal level of inputs
D. Unequal level of inputs
Answer : A

28. Nash equilibrium is applicable in case of:
A. Cournot model
B. Edgeworth model
C. Chamberline model
D. Sweezy model
Answer : A

29. If a firm is producing output at a point where diminishing returns have set in, this means that:
A. Each additional unit of output will be more expensive to produce
B. Each additional unit of output will require increasing amount of inputs
C. Marginal product of the variable factor of production decreases as the quantity increases
D. All of the above
Answer : D

30. An inferior good/ commodity is inferior for:
A. Every consumer
B. Most consumers
C. All consumers
D. Some consumers and not for others
Answer : D

31. 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

32. Cross-elasticity of demand is measured as:
A. Percentage change in the quantity of a commodity demanded divided by the percentage change in the price of that commodity
B. Percentage change in the quantity of commodity X divided by percentage change in the price of commodity Y
C. Percentage change in the quantity demanded of commodity X
D. Percentage change in the quantity demanded of commodity X divided by percentage change in the quantity demanded of commodity Y
Answer : B

33. Abstinence or Waiting theory of Interest was presented by:
A. Lord Keynes
B. J.S.Mill
C. Alfred Marshal
D. Prof.Senior
Answer : D

34. Time Preference Theory of Interest was presented by:
A. Adam Smith
B. Carl Menger
C. Ruskin
D. J.B.Say
Answer : B

35. Whish of the following represents the average revenue curve of a firm?
A. The curve representing the cost per unit of output
B. The demand curve of consumers for the firms product
C. Total receipts realized by the firm
D. All of the above
Answer : B

36. If the marginal utility of apples to a consumer exceeds that of bananas then the consumer:
A. Is not in equilibrium
B. Will not buy any banana
C. Will buy some banana but less than he buys of apples
D. Is willing to pay more for apples than bananas
Answer : D

37. With an increase in income, consumer is expected to buy more of:
A. An inferior good
B. A giffen good
C. A normal(or superior) good
D. None of the above
Answer : C

38. Elasticity (E) expressed by the term, 8 >E>1, is:
A. Perfectly elastic (infinitely elastic)
B. Relatively elastic (greater than one elasticity)
C. Unitary elastic
D. Relatively inelasticity (less than one elasticity)
Answer : B

39. The partial equilibrium model keeps other things:
A. Variable
B. Constant
C. Increasing
D. Decreasing
Answer : B

40. If two households have identical preferences but different incomes then:
A. They must consume the same amounts of all goods
B. The wealthier one will have lower marginal utility for most goods
C. The wealthier one will have higher marginal utility for most goods
D. They will enjoy the same level of utility
Answer : B

41. A monopolist will fix the equilibrium output of his product where the elasticity of his average revenue curve is:
A. Less than one
B. Equal to one
C. Greater than one
D. Less than one
Answer : C

42. 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

43. In dominant price leadership model, the dominant firm set the:
A. price
B. output
C. both a and b
D. none of the above
Answer : A

45. The demand curve in monopolistic competition (also in kinked demand curve model), which shows the share of a firm in market is called:
A. Relative demand curve
B. Proportional demand curve
C. Productive demand curve
D. Differential demand curve
Answer : B

46. In an indifference curve diagram, when the price of a product increases, the decline in quantity demanded that results if consumers utility or welfare is kept constant is referred to as the:
A. Utility effect
B. Budget line effect
C. Substitution effect
D. Income effect
Answer : C

47. Indifference curves reflect:
A. Preferences
B. Income
C. Prices
D. Consumption
Answer : A

48. In case of monopoly, TR curve rises at a:
A. Constant rate
B. Decreasing rate
C. Increasing rate
D. None of the above
Answer : B

49. In respect of which of the following category of goods is consumers surplus highest?
A. Giffen goods
B. Necessities
C. Luxuries
D. Prestige goods
Answer : B

50. 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