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

1. 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 up 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

2. If X and Y are close substitutes, a rise in the price of X will lead to:
A. Increase in demand for Y
B. Decrease in demand for Y
C. Decrease in demand for both X and Y
D. No change in demand for Y
Answer : A

3. If the commodities X and Y are perfect substitutes then:
A. B.
C. >
D. None of the above
Answer : C

4. The Substitution Effect (S.E) is always:
A. Negative
B. Zero
C. Positive
D. Infinite
Answer : A

5. The engineering production function and engineering costs curves are concerned with the:
A. Production cost
B. Collection cost
C. Raw material costs
D. Distribution costs
Answer : A

6. If a monopolist is producing under decreasing cost conditions, increase in demand is beneficial to the society because:
A. Consumers get better quality goods
B. Cost of production falls and hence price will follow
C. Goods will be sold in many markets
D. None of the above
Answer : B

7. In the modern theory of costs, the level of production which the firm considers feasible is known as:
A. Input factor
B. Heavy factor
C. Output factor
D. Load factor
Answer : D

8. The advantage of using indifference curves rather than marginal utilities is:
A. We do not need to attach util values to consumption
B. Consumers can attain higher utility
C. It takes into account how much income the household has
D. We can determine how much of one good the consumer is willing to sacrifice in order to consume one more unit of another
Answer : A

9. Demand is consumers:
A. Ability to get a commodity
B. Willingness to get a commodity
C. Willingness and ability to get a commodity
D. Desire for a commodity
Answer : C

10. The utility function u = f(x) is based upon :
A. Two goods
B. Few goods
C. One good
D. Zero goods
Answer : C

11. Karl Marx:
A. Led the Russian Revolution
B. Provided the theoretical basis for socialism(communism)
C. Developed his theory in response to the Great Depression of the 1930s
D. None of the above
Answer : B

12. In case of monopoly:
A. MRB. MR>AR
C. MR=AR
D. AR=0
Answer : A

13. 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

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

15. In Prisoner Dilemma, the best choice of strategy is:
A. Stable
B. Unstable
C. Negative
D. Neutral
Answer : B

16. According to the principle of substitution?
A. Many goods have no effective substitutes
B. Nearly all goods have substitutes
C. The prices of substitute goods must be the same
D. Buyers will stop buying a good if its price rises
Answer : B

17. If the commodity is inferior then the Income Effect (I.E) and the Substitution Effect (S.E):
A. Both move together and reinforce each other
B. One moves and the other remains constant
C. Move in the opposite direction and neutralize each other
D. Both remain constant
Answer : C

18. 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

19. The Cambridge School of Thought refers to the group of English economists who came under the influence of:
A. Alfred Marshal
B. J.M.Keynes
C. Paul A.Samuelson
D. A.C.Pigou
Answer : A

20. Who finalized the model of monopolistic competition?
A. Ricardo
B. Marshal
C. Chamberlin
D. Mrs. Robinson
Answer : C

strong>21. Elasticity (E) expressed by the term, 1>E>0, is:
A. Perfectly elastic
B. Relatively elastic
C. Unitary elastic
D. Relatively inelastic
Answer : D

22. If a straight line supply curve makes an intercept on the Y-axis, elasticity of supply is:
A. Equal to unity
B. Less than unity
C. More than unity
D. Zero
Answer : C

23. 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

24. An indifference curve normally slopes downward from:
A. Left to right
B. Right to left
C. Both of them
D. None of them
Answer : A

25. A firm under perfect competition has:
A. An AR curve which is a horizontal straight line
B. An AR curve which slopes downward
C. An AR curve which has a kink
D. An AR curve shape of which cannot be predicted
Answer : A

26. The situation of single buyer and single seller is called:
A. Monopoly
B. Multi-plant monopolist
C. Bilateral monopoly
D. Price discrimination
Answer : C

27. An individual consumers demand is not determined by:
A. Price of the commodity
B. Price of the substitutes
C. His household income
D. Size of countrys population
Answer : D

28. The costs faced by the firm against variable factors are:
A. Variable costs
B. Fixed costs
C. Average costs
D. Marginal costs
Answer : A

29. In price leadership, like leader, the follower firm may:
A. also maximize its profits
B. not maximize its profits
C. maximize its costs
D. none of the above
Answer : B

30. The spending of money by the producer to influence consumers is an example of:
A. Derived demand
B. Joint demand
C. Demand creation
D. Compressed demand
Answer : C

31. The modern cost curves are based upon the idea of:
A. Fixed capacity
B. Specific capacity
C. Excess capacity
D. Reserve capacity
Answer : D

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

33. Equilibrium of a discriminating monopolist requires the fulfillment of which one of the following conditions?
A. It must be profitable to him to sell output in more than one market
B. Marginal revenue in both markets must be the same
C. Marginal revenue in both markets must also be equal to the marginal cost of producing the monopolists aggregate output
D. All the above
Answer : D

34. 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

35. The budget line is described by each of the following except:
A. Prices of products are assumed to be fixed
B. The consumer need not to spend all his income
C. Consumer income is assumed to be fixed
D. The slope represents relative prices
Answer : B

36. An indifference curve shows the bundles of two goods among which a consumer remains:
A. Indifferent
B. Different
C. In equilibrium
D. Dominant
Answer : A

37. A country is advised to devalue (reduce external value of) its currency only when its exports face:
A. Inelastic demand in foreign markets
B. Elastic demand in foreign markets
C. Unit elastic demand in foreign markets
D. None of the above
Answer : B

38. In Edgeworth model, prices oscillate between:
A. Firms and industry price
B. Monopoly and duopoly price
C. Competitive and monopoly price
D. None of the above
Answer : C

39. If the commodity is inferior then the increase in income of the consumer results in:
A. More purchase
B. Less purchase
C. Same purchase
D. None of the above
Answer : B

40. The main contribution of Prof.Robbins is in the field of:
A. human welfare
B. national income
C. multiplicity of wants and scarcity of resources
D. theory of production
Answer : C

41. In monopoly, new firms:
A. Can enter and exit
B. Partially can enter and exit
C. Cannot enter
D. None of the above
Answer : C

42. In Prisoners Dilemma, both the prisoners are interrogated:
A. Separately in different cells
B. Collectively in different cells
C. Collectively in same cell
D. Separately in same cell
Answer : A

43. 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
A

44. If there are many firms producing similar but differentiated products, the competition is generally said to be:
A. Oligopoly
B. Pure competition
C. Perfect competition
D. Monopolistic competition
Answer : D

45. 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

46. The isoquant which are generated by CES (constant elasticity of substitution) production function are always:
A. Positively sloped
B. Negatively sloped
C. Concave to the origin
D. None of the above
Answer : B

47. In Revealed Preference Theory, a consumer reveals preference for bundle of:
A. Two goods
B. A few goods
C. One good
D. Many goods
Answer : A

48. All of the following are capital resources except:
A. Warehouses
B. Buildings
C. Dams
D. Share of stock
Answer : D

49. In case of complementary factors, the isoquants are:
A. L-shaped
B. J-shaped
C. M-shaped
D. V-shaped
Answer : A

50. The maximization of output subject to cost requires equilibrium at the:
A. Lowest isoquant
B. Lowest isocost line
C. Highest isoquant
D. Highest isocost line
Answer : C