Basics of Economics 1000+ MCQ with answer for SSC CPO

1. 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

2. 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

3. A decrease in demand lowers the price the most:
A. In the immediate run
B. In the short run
C. When the supply is perfectly elastic
D. When producers have sufficient time to fully adjust to the demand change
Answer : A

4. In the case of two factor inputs which are neither perfectly complementary nor perfect substitutes, the iso-product curve will be:
A. A downward sloping straight line
B. A downward sloping curve
C. An upward rising curve
D. Right angled iso-quants
Answer : B

5. Law of Diminishing Marginal Utility is practically untrue because:
A. It is given to a lot of criticism
B. It is too difficult to be explained
C. It is based on assumptions which are unreal
D. Economists do not agree on this
Answer : C

6. A firm is a sum of persons who convert:
A. Goods into services
B. Output into inputs
C. Inputs into outputs
D. None of the above
Answer : C

7. A fall in demand for the product under monopolistic competition will likely result in:
A. A fall in price
B. A decrease in the number of firms in the long-run
C. A decrease in the output of each firm
D. All of the above
Answer : D

8. On an indifference map higher indifference curves 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

9. Which industries spend a relatively large share of their revenue on research and development in order to keep up with their competitors?
A. Grocery stores
B. High-Tech industries
C. Automobiles
D. Construction
Answer : B

10. The monopolist who is producing the same output from two (or more than two) plants is concerned with:
A. Single-plant monopolist
B. Multi-plant monopolist
C. Two-plant monopolist
D. Some-plant monopolist
Answer : B

11. The demand of the luxuries is:
A. More elastic
B. Less elastic
C. Unit elastic
D. Zero elastic
Answer : A

12. A profit-maximizing monopolist in two separate markets will:
A. Charge the same price in both markets
B. Always charge a higher price in the market where he sells more
C. Always charge a higher price in the market where he sells less
D. Adjust his sales in the two markets so that his marginal revenue in each market just equals his aggregate marginal cost
Answer : D

13. 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

14. 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

15. According to Diamond Water Paradox diamonds are more expensive than water because:
A. They yield higher total utility
B. They yield higher marginal utility
C. They are more useful
D. None of the above
Answer : B

16. When price increases and with it the total outlay on a commodity also increases, it is a case of:
A. Perfect elasticity (infinitely elastic)
B. Relative elasticity (greater than one elasticity)
C. Perfect inelasticity (zero elasticity)
D. Relative inelasticity (less than one elasticity)
Answer : D

17. Price discrimination occurs when:
A. Different prices are charged to different consumers for homogenous products
B. Same prices are charged for differentiated products
C. Different prices are charged for homogenous goods for successive units to the same customer
D. Any of the above condition is present
Answer : D

18. The monopolist often lead to exploitation of:
A. Producers
B. Workers
C. Managers
D. Consumers
Answer : D

19. In Edgeworth model, price remains:
A. Constant
B. On increasing
C. Independent
D. Indeterminate
Answer : D

20. The production possibility curve (PPC) is concerned with:
A. Resources of the economy
B. Interests of the economy
C. Limitations of the economy
D. Qualities of the economy
Answer : A

22. The cobweb model will divergent 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 : B

23. Revealed Preference Theory was presented by:
A. Ricardo
B. Adam Smith
C. Pigou
D. Samuelson
Answer : D

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

25. Total costs in the short-term (short-run) are classified into fixed costs and variable costs. Which one of the following is a variable cost?
A. Cost of raw materials
B. Cost of equipment
C. Interest payment on past borrowing
D. Payment of rent on buildings
Answer : A

26. 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

27. If both demand and supply were to increase then:
A. Quantity exchanged would fall and price would rise
B. Quantity exchanged and price would both fall
C. Quantity exchanged would rise and price might rise or fall
D. Quantity exchanged and price would both rise
Answer : C

28. A monopolist is able to maximize his profit when:
A. His output is maximum
B. He charges a high price
C. His average cost is minimum
D. His marginal revenue is equal to marginal cost
Answer : D

29. The relationship between AC and MC curves depend upon the behavior of:
A. AP curves
B. MP curves
C. Both of them
D. None of them
Answer : C

30. 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

31. If in the long run, output increases in the same proportion as increase in all the input in the given proportion, this is known as:
A. Increasing returns to scale
B. Decreasing returns to scale
C. Constant returns to scale
D. Variable returns to scale
Answer : C

32. With the decrease in marginal valuation of a specific commodity, the price offered by the people:
A. Decreases
B. Increases
C. Become very high
D. Remain unchanged
Answer : A

33. The average fixed cost (AFC) curve is asymptote to:
A. X-axis
B. Y-axis
C. Z-axis
D. None of the above
Answer : A

34. 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

35. 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

36. The law of variable proportions comes into being when:
A. All factors are variable
B. There is a fixed factor and variable factor
C. All factors are non-variable
D. None of the above
Answer : B

37. In short run, a firm would remain in business as long as which one of the following of cost is covered?
A. Total costs
B. Fixed costs
C. Variable costs
D. Constant costs
Answer : C

38. Which is the other name that is given to the average revenue curve?
A. Profit curve
B. Demand curve
C. Average cost curve
D. Indifference curve
Answer : B

39. To get more revenue, a Finance Minister impose tax on that commodity which has:
A. Inelastic demand
B. Elastic demand
C. Unit elasticity
D. Zero elasticity
Answer : A

40. 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

41. Given a U shaped average cost curve, the relationship between average cost and marginal cost is such that marginal cost must always be:
A. Falling when average cost is falling
B. Rising when average cost is falling
C. Falling when average cost is rising
D. Rising when average cost is rising
Answer : D

42. The law of demand is most directly a result of:
A. The law of comparativeadvantage
B. The law of diminishing returns
C. The principle of substitution
D. Economics of large scale production
Answer : C

43. Economic problems arise because:
A. Wants are unlimited
B. Resources are scarce
C. Scarce resources have alternative uses
D. All of the above
Answer : D

44. 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

45. If the demand curve remains unchanged and supply increases, the price will:
A. Rise
B. Fall
C. Remain the same
D. None of the above
Answer : B

46. Returns to scale is a:
A. Timeless phenomenon
B. Short run phenomenon
C. Long run phenomenon
D. None of the above
Answer : C

47. Demand is elastic when the coefficient of elasticity is:
A. greater than zero
B. less than one
C. greater than one
D. less than one
Answer : C

48. 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

49. Total variable cost curve:
A. Steps downwards at first and then upwards
B. Steps upwards, then remains constant and then falls
C. Steps downwards
D. None of the above
Answer : A

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