Basics of Economics 1000+ MCQ with answer for LSAT

1. 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

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

3. Each SAC represents a particular level of:
A. Input
B. Output
C. Both of them
D. None of them
Answer : B

4. The entry of new firms in cournot model is:
A. Banned
B. Free
C. Partially free
D. Allowed
Answer : A

5. In constant sum game (zero sum game), if there are two parties then:
A. Both parties make better-off
B. Both parties make worse-off
C. Both parties become Neutral
D. One party can become better off only if another is made worse off
Answer : D

6. The number of sellers in oligopoly are:
A. Two
B. Many
C. Four
D. Very few
Answer : D

7. If a person behaves against the laws of economics then:
A. He should be condemned
B. He may lose his respect from society
C. He should be punished
D. He should not be punished or even criticised
Answer : D

8. According to Marshal, the Law of Diminishing Returns is applicable to:
A. Industry
B. All fields of production
C. Agriculture
D. None of the above
Answer : C

9. The firms in non-cooperative games:
A. Enforce contracts
B. Make contracts
C. Make negotiations
D. Do not make negotiations
Answer : D

10. When was Adam Smiths major work An Enquiry into the Nature and Causes of Wealth of Nations published?
A. 1756
B. 1777
C. 1776
D. 1801
Answer : C

11. In short-run, in monopolistic competition, a firm earns:
A. Normal profits
B. Abnormal profits
C. No profits
D. All of the above
Answer : B

12. The long run average cost curve is:
A. Cup-shaped
B. Oval-shaped
C. Saucer-shaped
D. Glass-shaped
Answer : C

13. In the long-run:
A. Fixed cost will be greater than variable cost
B. Variable costs will be greater than fixed costs
C. All costs are variable costs
D. All costs are fixed costs
Answer : C

14. Ceteris paribus clause in the law of demand means:
A. The price of substitute does not change
B. The taste of the consumer does not change
C. The income of the consumer does not change
D. All of the above
Answer : D

15. In the perfect competition, there is a process of:
A. Restricted entry and exit of the firms
B. Semi free exit but absolute free entry
C. Free entry but restricted exit of the firms
D. Free entry and free exit of the firms
Answer : D

16. A market-clearing price:
A. Is a disequilibrium price
B. Is an equilibrium price
C. Means a shortage exists as a market is cleared
D. Must be set by the government
Answer : B

17. 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

18. If the commodity is normal then fall in price will result in:
A. Increase the quantity demanded
B. Fixed the quantity demanded
C. Decrease the quantity demanded
D. None of the above
Answer : A

19. Scarcity means:
A. Nil resources
B. Limited resources
C. Many resources
D. Extra resources
Answer : B

20. Increasing returns imply:
A. Constant average cost
B. Diminishing cost per unit of output
C. Optimum use of capital and factor
D. External economies
Answer : B

21. Law of Returns to Scale shows:
A. Technical relationship between input of a variable factor and the resulting output
B. Any economic relationship between input and output
C. An output maximizing relationship
D. A relationship with input changing and corresponding changes in output
Answer : A

22. Loanable funds theory of Interest was developed by:
A. Wicksell
B. Robert San
C. Ruskin
D. J.B.Say
Answer : A

23. The relationship between MC and MP shown by the marginal cost concept is:
A. Inverse
B. Direct
C. Negative
D. Positive
Answer : A

25. 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

26. Which of the following statement is wrong?
A. A utility function refers to a particular individual and reflects the tastes of that individual
B. When the tastes of an individual changes, his utility function changes(shifts)
C. Different individuals usually have different tastes and thus have different utility functions
D. Different individuals have same tastes and thus have the same utility function
Answer : D

27. The normal long-run average cost curve is influenced by the:
A. Principle of diminishing returns
B. Economies and diseconomies of large scale production
C. Principle of constant return to scale
D. All of the above
Answer : B

28. The situation in between the extremes of the govt. controlled, planned economy and the perfectly free, unplanned economy is known as:
A. Developed economy
B. Laissez-fair economy
C. Mixed economy
D. Capitalistic economy
Answer : C

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. 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

31. In modern theory, LAC = LMC after the attainment of:
A. Maximum optimal scale
B. Average optimal scale
C. Minimum optimal scale
D. None of the above
Answer : C

32. In real life firms:
A. Loss because of past
B. Learn from past
C. Destroy because of past
D. None of the above
Answer : B

33. 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

34. The consumer is in equilibrium at the where:
A. Budget line and indifference curve intersect each other
B. Budget line and indifference curve are tangent to each other
C. Budget line and indifference curve are opposite to each other
D. Budget line and indifference curve are parallel to each other
Answer : B

35. General equilibrium is concerned with simultaneous equilibrium of:
A. Few economic agents
B. All the economic agents
C. Two economic agents
D. Many economic agents
Answer : B

36. Some economists refer to iso-product curves as:
A. Engels curve
B. Production indifference curve
C. Budget line
D. Ridge line
Answer : B

37. Economic laws are:
A. Conditional
B. Moral by nature
C. Predicted
D. Like laws of sports
Answer : A

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

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

40. The Tit for Tat strategy means cooperation by the 2nd firm if:
A. 1st firm does not cooperate
B. 1st firm cooperates
C. 1st firm collapses
D. None of the above
Answer : B

41. The expansion point is attained by joining:
A. Similar optimal combinations
B. Different optimal combinations
C. Both of them
D. None of them
Answer : B

42. Monopoly means:
A. Where there is no retail trade and every thing is sold on wholesale basis
B. Where trading of a particular commodity is controlled exclusively by one firm
C. Where many people sell only one commodity
D. A form of business organization in which only single proprietorship exists
Answer : B

43. 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

44. 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

45. On an indifference map higher indifference curvs show:
A. The same level of price
B. The same level of satisfaction
C. The higher level of satisfaction
D. The lower level of satisfaction
Answer : C

46. Moving along an indifference curve leaves the consumer:
A. Better off
B. Worse off
C. Neither better nor worse off
D. None of the above
Answer : C

47. Which of the following does not have a uniform elasticity of demand at all points?
A. A vertical demand curve
B. A horizontal demand curve
C. A rectangular hyperbola demand curve
D. A downward sloping demand curve
Answer : D

48. 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

49. 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

50. Labor 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 : B