Basics of Economics 1000+ MCQ with answer for LIC ADO

1. A producer attains the least cost combination when the relation between Marginal Rate of Technical Substitution (MRTS) and price (P) of the factors x and y is:
A.
B.
C.
D.
Answer : B

2. 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

3. Marginal Productivity Theory deals with the theory of:
A. Distribution
B. Exchange
C. Market structure
D. Consumer behaviour
Answer : A

4. Engel curves shows that:
A. How commoditys consumption rate differs at various levels of price
B. How commoditys consumption rate differs at various levels of satisfaction
C. How commoditys consumption rate differs at various levels of income
D. How commoditys consumption rate differs at various levels of taxes
Answer : C

5. Supply of commodity is a:
A. A stock concept
B. A flow concept
C. Both stock and flow
D. None of the above
Answer : B

6. When income of the consumer increases then demand curve of an inferior good:
A. Shifts rightward
B. Shifts leftward
C. Does not shift
D. None of the above
Answer : B

7. The ordinal approach was presented by:
A. Marshal
B. J.R.Hicks
C. Adam smith
D. Rostow
Answer : B

8. A demand schedule is shown as:
A. A function of price alone
B. A result of change in tastes
C. A result of increase in the size of the family
D. None of the above
Answer : A

9. Under monopolistic competition, the firms compete alongwith:
A. Supreme powers
B. Discretionary powers
C. Low powers
D. None of the above
Answer : B

10. The budget constraint can be written as:
A. X.PX + Y.PY = 1
B. X.PX + Y.PY < 1
C. X.PX + Y.PY > 1
D. X.PX + Y.PY = 0
Answer : A

11. In monopolistic competition, the aim of the firm is to:
A. Maximize output
B. Minimize output
C. Minimize cost
D. Maximize profit
Answer : D

12. In Recardian theory of value, the stress has been made on:
A. Marginal cost
B. Production cost
C. Labor cost
D. Supply cost
Answer : A

13. 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

14. According to M.Kalecki, the true measure of the degree of monopoly power is the:
A. Ratio between price and marginal cost
B. Extent of monopolistic profit enjoyed by him
C. Cross-elasticity of demand for the product of the monopolist
D. Price charged by the monopolist minus marginal cost of production
Answer : A

15. Of the following, which one corresponds to fixed cost?
A. Payments for raw materials
B. Labor cost
C. Transportation charges
D. Insurance premium on property
Answer : D

16. Total costs are:
A. TFC TVC
B. TFC/TVC
C. TVC/TFC
D. TFC +TVC
Answer : D

17. In monopoly, the relationship between average revenue and marginal revenue curves is as follows:
A. Average revenue curve lies above the marginal revenue curve
B. Average revenue curve coincides with the marginal revenue curve
C. Average revenue curve lies below the marginal revenue curve
D. Average revenue curve is parallel to the marginal revenue curve
Answer : A

18. According to classical approach, utility can be:
A. Ranked
B. Consumed
C. Expressed in numbers
D. Cannot be expressed in numbers
Answer : C

19. Cournot equilibrium is attained where two reaction curves:
A. Repel each other
B. Represent each other
C. Intersect each other
D. None of the above
Answer : C

20. If by doubling all inputs in the long run output is less than double, it is a case of:
A. Increasing returns to scale
B. Decreasing returns to scale
C. Constant returns to scale
D. Variable returns to scale
Answer : B

21. If production increases under constant returns to scale, the cost will:
A. Increase at a constant rate
B. Decrease at a constant rate
C. Increase at a variable rate
D. Decrease at a variable rate
Answer : A

22. 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

23. Marshalls definition of economics was strongly criticised by:
A. Adam Smith
B. Prof.Pigno
C. Prof. Robbins
D. J.B.Clark
Answer : C

24. If the demand curve is vertical then its slope is:
A. Infinite
B. Zero
C. Equal to one
D. None of the
Answer : B

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

26. An exceptional demand curve is:
A. Downward sloping
B. Upward sloping
C. Horizontal straight line
D. Vertical straight line
Answer : B

27. If the supply and demand increases equally, the price will:
A. Rise
B. Fall
C. Remain unchanged
D. Change depending on respective elasticities
Answer : C

28. 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

29. 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

30. 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

31. Under Bandwagon effects, people use those goods which are used by their:
A. Friends
B. Relatives
C. Family
D. All of them
Answer : D

32. A monopolist has control over the price he charges for his product. He will be able to maximize his profit by:
A. Lowering the price, if the demand curve is elastic
B. Lowering the price, if the demand curve is inelastic
C. Rising the price, if the demand curve is elastic
D. None of the above is applicable
Answer : A

33. When the level of optimal factor combination is over and more labor is employed with the fixed plant, the efficiency of labor:
A. Increases
B. Decreases
C. Remains constant
D. Becomes zero
Answer : B

34. Excess capacity is not found under:
A. Monopoly
B. Monopolistic competition
C. Perfect competition
D. Oligopoly
Answer : C

35. In the case where two commodities are good substitutes then cross elasticity will be:
A. Positive
B. Unitary
C. Negative
D. Infinite
Answer : A

36. Competitors in monopolistic competition have full control over:
A. The price of their product
B. Product quality
C. The shape of the market demand curve
D. The elasticity of product substitution
Answer : B

37. Price mechanism has also given the name:
A. Labor theory
B. Production theory
C. Laisseze-faire
D. None of the above
Answer : C

38. Market demand curve is:
A. Vertical summation of individual demand curves
B. Upward summation of individual demand curves
C. Downward summation of individual demand curves
D. Horizontal summation of individual demand curves
Answer : D

39. Price elasticity of demand is best defines as:
A. Change in the tastes of consumers at different prices
B. The rate of response of demand to a change in supply
C. The change in costs when output is increased by one unit
D. The responsiveness of demand to a change in price
Answer : D

40. 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

41. Which of the following is not an explicit cost of production?
A. Wage of self-employed proprietor
B. Depreciation on machinery
C. Returns on owned capital
D. Cost of raw materials
Answer : D

42. 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

43. The effect of consumer boycotts usually is:
A. A rise in the price of the product B. A decrease in the demand for the product
C. A decrease in the supply of the product
D. An increase in the quantity supplied of the product
Answer : B

44. The equilibrium conditions, MC = MR = AR = AC, will happen:
A. In the short-run under perfect competition
B. In the long-run under perfect competition
C. In the short-run under monopolistic competition
D. In the long-run under monopolistic competition
Answer : B

45. The basic and essential economic problems in a community are related to choice and:
A. Freedom
B. Scarcity
C. Social class
D. Politics
Answer : B

46. The elliptical isoquant represents the:
A. Economic combinations of labor and capital
B. Uneconomic combinations of labor and capital
C. Both a and b
D. None of the above
Answer : C

47. According to Robbins, economics is a:
A. Science of wealth
B. Science of national welfare
C. Science of optimality
D. Science of scarcity
Answer : D

48. Which of the following formula determine the income elasticity of demand?:
A. Proportionate change in demand Proportionate change in price
B. Proportional change in the purchase of Y Proportional change in the price of X
C. Proportionate change in demand Proportionate change in income
D. Proportionate change in demand Proportionate change in price
Answer : C

49. The cobweb model will convergent when the slope of:
A. Demand curve is more than supply curve
B. Supply curve is more than demand curve
C. Supply curve is equal to demand curve
D. None of the above
Answer : A

50. In sweezy model (kinked demand curve model), the role of MC curve:
A. Can be ignored
B. Cannot be ignored
C. Partially be ignored
D. None of the above
Answer : A