Basics of Economics 1000+ MCQ with answer for GMAT
Thursday 9th of March 2023
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1. 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
A. Left to right
B. Right to left
C. Both of them
D. None of them
Answer : A
2. The optimal strategy for a player is termed as:
A. Recessive strategy
B. Dormant strategy
C. Dominant strategy
D. Hidden strategy
Answer : C
A. Recessive strategy
B. Dormant strategy
C. Dominant strategy
D. Hidden strategy
Answer : C
3. An iso-product (an isoquant) curve slopes:
A. Downward to the left
B. Downward to the right
C. Upward to the right
D. Upward to the left
Answer : B
A. Downward to the left
B. Downward to the right
C. Upward to the right
D. Upward to the left
Answer : B
4. 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
A. Government
B. Consumer
C. Producer
D. Stock holder
Answer : B
5. Now-a-days in real life, we are unable to fined:
A. Monopoly
B. Perfect competition
C. Imperfect competition
D. Monopolistic competition
Answer : B
A. Monopoly
B. Perfect competition
C. Imperfect competition
D. Monopolistic competition
Answer : B
6. When SAC curve rises, SMC curve lies its:
A. Below
B. Above
C. Equal level
D. None of the above
Answer : B
A. Below
B. Above
C. Equal level
D. None of the above
Answer : B
7. In general, most of the production functions measure:
A. The productivity of factors of production
B. The relation between the factors of production
C. The economies of scale
D. The relations between change in physical inputs and physical output
Answer : B
A. The productivity of factors of production
B. The relation between the factors of production
C. The economies of scale
D. The relations between change in physical inputs and physical output
Answer : B
8. According to Chamberline, in monopolistic competition, differentiation is determined by:
A. Choices
B. Preferences
C. Both a and b
D. None of the above
Answer : C
A. Choices
B. Preferences
C. Both a and b
D. None of the above
Answer : C
9. In Prisoners Dillemma, the players are:
A. Industrialists
B. Prisoners
C. Common men
D. Workers
Answer : B
A. Industrialists
B. Prisoners
C. Common men
D. Workers
Answer : B
10. Nash equilibrium says:
A. I am doing the best, I can given what you are doing
B. You are doing the best, you can given what I am doing
C. Both a and b
D. None of the above
Answer : C
A. I am doing the best, I can given what you are doing
B. You are doing the best, you can given what I am doing
C. Both a and b
D. None of the above
Answer : C
11. 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
A. More units
B. Less units
C. Same units
D. Zero units
Answer : A
12. In the case of superior (normal) commodity, the income elasticity of demand is:
A. Positive
B. Unitary
C. Negative
D. Infinite
Answer : A
A. Positive
B. Unitary
C. Negative
D. Infinite
Answer : A
13. In the long-run competitive equilibrium, the theory predicts that:
A. TC = TR and MC = MR
B. Firms operate at a minimum average total cost
C. There is no incentive for entry or exit of firms
D. All these conditions exist
Answer : D
A. TC = TR and MC = MR
B. Firms operate at a minimum average total cost
C. There is no incentive for entry or exit of firms
D. All these conditions exist
Answer : D
14. In Prisoner Dilemma, the best choice of strategy is:
A. Stable
B. Unstable
C. Negative
D. Neutral
Answer : B
A. Stable
B. Unstable
C. Negative
D. Neutral
Answer : B
15. The concept of period refers to:
A. A specific duration of time
B. A varying duration of time
C. A duration of time which permits necessary adjustments
D. A period with calculated intervals
Answer : B
A. A specific duration of time
B. A varying duration of time
C. A duration of time which permits necessary adjustments
D. A period with calculated intervals
Answer : B
16. Efficient allocation of resources is achieved to a greater extent under:
A. Monopoly
B. Perfect competition
C. Monopolistic competition
D. Oligopoly
Answer : B
A. Monopoly
B. Perfect competition
C. Monopolistic competition
D. Oligopoly
Answer : B
17. Cross-demand curve shows:
A. The effect of a change in price of X on its demand
B. The effect of a change in price of X on the demand for Y
C. The effect of a change in price of Y on its demand
D. None of the above
Answer : B
A. The effect of a change in price of X on its demand
B. The effect of a change in price of X on the demand for Y
C. The effect of a change in price of Y on its demand
D. None of the above
Answer : B
18. 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
A. David Ricardo
B. Adam Smith
C. T.R.Malthus
D. J.S.Mill
Answer : B
19. If Cobb-Douglas production function is homogeneous of degree less than one (n<1), then it shows:
A. Constant returns to scale
B. Increasing returns to scale
C. Decreasing returns to scale
D. None of the above
Answer : C
A. Constant returns to scale
B. Increasing returns to scale
C. Decreasing returns to scale
D. None of the above
Answer : C
20. Price discrimination is possible:
A. Only under monopoly situation
B. Under any market form
C. Only under monopolistic competition
D. Only under perfect competition
Answer : A
A. Only under monopoly situation
B. Under any market form
C. Only under monopolistic competition
D. Only under perfect competition
Answer : A
21. When the slope of a demand curve is zero (also known as vertical demand curve) then elasticity will be:
A. Zero (perfectly inelastic)
B. Equal to one (unitary elastic)
C. Infinite (perfectly elastic)
D. None of the above
Answer : C
A. Zero (perfectly inelastic)
B. Equal to one (unitary elastic)
C. Infinite (perfectly elastic)
D. None of the above
Answer : C
22. Under Bandwagon effects, people use those goods which are used by their:
A. Friends
B. Relatives
C. Family
D. All of them
Answer : D
A. Friends
B. Relatives
C. Family
D. All of them
Answer : D
23. Perfect competition implies:
A. Differentiated goods
B. Homogeneous goods
C. Advertised goods
D. Distress sale of goods
Answer : B
A. Differentiated goods
B. Homogeneous goods
C. Advertised goods
D. Distress sale of goods
Answer : B
24. When the demand curve is rectangular hyperbola, it represents:
A. Unitary elastic demand
B. Perfectly elastic demand
C. Perfectly inelastic demand
D. Relatively elastic demand
Answer : A
A. Unitary elastic demand
B. Perfectly elastic demand
C. Perfectly inelastic demand
D. Relatively elastic demand
Answer : A
25. Which of the following is assumed to be constant when drawing a demand curve?
A. Consumer tastes
B. Prices of inputs
C. Technology
D. Number of sellers
Answer : A
A. Consumer tastes
B. Prices of inputs
C. Technology
D. Number of sellers
Answer : A
26. A market demand schedule is obtained by adding individual demand schedules:
A. Horizontally
B. Vertically
C. Permanently
D. Perpetually
Answer : A
A. Horizontally
B. Vertically
C. Permanently
D. Perpetually
Answer : A
27. Income distribution effects:
A. The price of complements
B. The price of substitutes
C. The market demand for commodities
D. The individuals scale of performances
Answer : C
A. The price of complements
B. The price of substitutes
C. The market demand for commodities
D. The individuals scale of performances
Answer : C
28. Which of the following is called Gossens first law?
A. Law of production
B. The Law of Equi-Marginal Utility
C. The Law of Diminishing Marginal Utility
D. Law of Variable Proportions
Answer : C
A. Law of production
B. The Law of Equi-Marginal Utility
C. The Law of Diminishing Marginal Utility
D. Law of Variable Proportions
Answer : C
29. The optimum level of output in long run takes place where:
A. LAC = LMC
B. SAC = LMC
C. SAC =MC
D. SAC =LAC
Answer : D
A. LAC = LMC
B. SAC = LMC
C. SAC =MC
D. SAC =LAC
Answer : D
30. Isocost line shows the combinations of labor and capital where a firms budget is:
A. Fully spent
B. Half spent
C. Partially spent
D. Nearly spent
Answer : A
A. Fully spent
B. Half spent
C. Partially spent
D. Nearly spent
Answer : A
31. Liquidity of Preference Theory was introduced by:
A. Alfred Marshal
B. Lord Keynes
C. Karl Marx
D. Prof. Robbins
Answer : B
A. Alfred Marshal
B. Lord Keynes
C. Karl Marx
D. Prof. Robbins
Answer : B
32. 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
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
33. When elasticity of demand is one (e=1), then following the formula MR=P[1-1/e], the MR will:
A. Positive
B. Negative
C. Zero
D. None of the above
Answer : C
A. Positive
B. Negative
C. Zero
D. None of the above
Answer : C
34. The difference between average cost and average revenue is:
A. Total profit
B. Average profit
C. Net profit
D. Marginal profit
Answer : B
A. Total profit
B. Average profit
C. Net profit
D. Marginal profit
Answer : B
35. The general form of Cobb-Douglas production function is:
A.
B.
C.
D.
Answer : C
A.
B.
C.
D.
Answer : C
36. A demand curve which is horizontal and parallel to x-axis represents:
A. Infinitely elastic demand
B. Infinitely inelastic demand
C. Relatively elastic demand
D. Relatively inelastic demand
Answer : A
A. Infinitely elastic demand
B. Infinitely inelastic demand
C. Relatively elastic demand
D. Relatively inelastic demand
Answer : A
37. If at the unchanged price, the demand for a commodity goes up, or the quantity demanded remains the same when its price goes up, it is called:
A. Contraction of demand
B. Decrease in demand
C. Increase in demand
D. Extension of demand
Answer : C
A. Contraction of demand
B. Decrease in demand
C. Increase in demand
D. Extension of demand
Answer : C
38. At high prices, demand is likely to be:
A. More elastic
B. Less elastic
C. Unit elastic
D. Perfectly inelastic
Answer : A
A. More elastic
B. Less elastic
C. Unit elastic
D. Perfectly inelastic
Answer : A
39. 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
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
40. The difference between accounting profits and economic profits is:
A. Implicit costs
B. Explicit costs
C. Fixed costs
D. Variable costs
Answer : A
A. Implicit costs
B. Explicit costs
C. Fixed costs
D. Variable costs
Answer : A
41. Plumbing and pipe-fitting require many of the same skills. If the wage paid to pipe-fitters increased then the effect on the market for plumbers would probably be:
A. An increase in demand
B. A decrease in demand
C. An increase in supply
D. A decrease in supply
Answer : D
A. An increase in demand
B. A decrease in demand
C. An increase in supply
D. A decrease in supply
Answer : D
42. Extension (expansion) and contraction of demand are result of:
A. Change in consumers income
B. Change in consumers tastes
C. Change in price
D. None of the above
Answer : C
A. Change in consumers income
B. Change in consumers tastes
C. Change in price
D. None of the above
Answer : C
43. In 1776, a famous book An enquiry into the nature and causes of the wealth of nation was written by:
A. J.S.Mill
B. Adam Smith
C. Robert Malthus
D. David Ricardo
Answer : B
A. J.S.Mill
B. Adam Smith
C. Robert Malthus
D. David Ricardo
Answer : B
44. The main contribution of Prof. R.G.D.Allen is in the field of:
A. fixation of price
B. Arc elasticity of demand
C. Cross elasticity of demand
D. Wage theory
Answer : B
A. fixation of price
B. Arc elasticity of demand
C. Cross elasticity of demand
D. Wage theory
Answer : B
45. 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
A. Maximizes the minimum gain that can be earned
C. Minimizes the maximum gain that can be earned
D. None of the above
Answer : A
46. The model which gives us information about price and output changes in different periods is:
A. Stable cobweb model
B. Perpetual oscillation
C. Both(a) and(b)
D. None of them
Answer : C
A. Stable cobweb model
B. Perpetual oscillation
C. Both(a) and(b)
D. None of them
Answer : C
47. Who finalized the model of imperfect competition?
A. Ricardo
B. Marshal
C. Chamberlin
D. Mrs. Robinson
Answer : D
A. Ricardo
B. Marshal
C. Chamberlin
D. Mrs. Robinson
Answer : D
48. There is no difference between fixed and variable factors in the:
A. Long run
B. Short run
C. Average run
D. None of the above
Answer : A
A. Long run
B. Short run
C. Average run
D. None of the above
Answer : A
49. Marshallian demand function is also known as:
A. Utility demand function
B. Compensated demand function
C. Collective demand function
D. Relative demand function
Answer : B
A. Utility demand function
B. Compensated demand function
C. Collective demand function
D. Relative demand function
Answer : B
50. In Edgeworth model, if price falls below competitive price, the demand is:
A. More than maximum output
B. More than minimum output
C. Less than maximum output
D. Less than minimum output
Answer : A
A. More than maximum output
B. More than minimum output
C. Less than maximum output
D. Less than minimum output
Answer : A
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