Basics of Economics MCQ Solved Paper for IBPS SO

1. If as a result of an increase in prices, total outlay (expenditures) on a commodity decreases, its price-elasticity of demand is:
A. Perfect elastic (infinitely elastic)
B. Relatively elastic (greater than one elasticity)
C. Unit elastic
D. Relatively inelastic (less than one elasticity)
Answer : B

2. Who wrote Economics of Imperfect Competition?
A. E.H.Chamberlin
B. Joan Robinson
C. E.A.G.Robinson
D. J.M.Keynes
Answer : B

3. According to marginalistic rule, the profit maximization hypothesis requires:
A. MCB. MC>MR
C. MC=AP
D. MC=MR
Answer : D

4. A monopolist is:
A. Price winner
B. Price searcher
C. Price taker
D. Price leaver
Answer : B

5. The costs faced by the firm against fixed factors are:
A. Total costs
B. Fixed costs
C. Variable costs
D. Marginal costs
Answer : B

6. The low cost price leader will charge:
A. higher prices
B. zero prices
C. lower prices
D. specific prices
Answer : C

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

8. The proportionality rule in production requires that the ratios of MP and factor prices are:
A. Doubled
B. Equalized
C. Not equalized
D. None of the above
Answer : B

9. Demand of a commodity is elastic when:
A. Change in its price causes a proportionately greater change in its quantity demanded
B. Change in its price does not change its quantity demanded
C. Change in consumers income causes change in demand
D. None of the above
Answer : A

10. The non-price competition cartel is a:
A. stable cartel
B. unstable cartel
C. prominent cartel
D. special cartel
Answer : B

11. Rent is a creation of value, not of wealth who made this observation?
A. Adam Smith
B. David Ricardo
C. Alfred Marshal
D. A.C.Pigou
Answer : B

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

13. 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

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

15. Increase in demand occurs when:
A. The price falls and the demand also falls down
B. The price increases but demand falls down
C. The price increases the demand remains constant and when the price remains constant the demand goes up
D. The price remains constant but demand falls
Answer : C

16. In microeconomics, we study:
A. Aggregates of the economy
B. Few units of the economy
C. Large units of the economy
D. Individual units of the economy
Answer : D

17. The Hicksian demand curve includes:
A. Substitution effect
B. Income effect
C. Both substitution and income effect
D. None of them
Answer : A

18. 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

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

20. Of the following commodities, which has the lowest price-elasticity of demand?
A. Car
B. Salt
C. Tea
D. House
Answer : B

21. Which is not a central problem of an economy?
A. What to produce
B. How to produce
C. How to maximize private profit
D. For whom to produce
Answer : C

22. In case of short-run, the supply curve of an industry is the horizontal summation of:
A. Marginal cost curves
B. Average cost curves
C. Total cost curves
D. None of the above
Answer : A

23. If cross-elasticity of one commodity for another turns out to be zero, it means they are:
A. Close substitutes
B. Good complements
C. Completely unrelated (independent goods)
D. None of the above
Answer : C

24. The Prisners Dilemma was presented by A.W.Tucker in:
A. 1910
B. 1945
C. 1900
D. 1940
Answer : D

25. As the price of diamond is higher, so it has:
A. Higher marginal valuation for consumer
B. Lower marginal cost for producer
C. Higher marginal cost for producer
D. Both (a) and (c)
Answer : D

26. If the supply curve is not a straight line but curvilinear, the elasticity on all points of the supply curve is:
A. Equal
B. Different
C. Zero
D. Infinity
Answer : B

27. 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

28. Necessary condition for consumer equilibrium is:
A.
B.
C.
D.
Answer : A

29. By reducing the prices of its products below those of its competitors, a perfectly competitive seller:
A. Reduces its revenues
B. Increases its revenues
C. Can sell nothing
D. None of the above
Answer : A

30. In a competitive market, price is determined primarily by:
A. Transportation costs
B. The interplay of demand and supply
C. Costs of production
D. The marginal product of labour
Answer : B

31. In non-collusive oligopoly firms enter into:
A. Secret agreements
B. No secret agreements
C. Bad habits
D. None of the above
Answer : B

32. In short run, a firm can change its:
A. Total production
B. Fixed production
C. Variable production
D. None of the above
Answer : C

33. 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

34. Stable cobweb model is a:
A. Simple model
B. Dynamic model
C. Both of them
D. None of them
Answer : C

35. The equilibrium level of output for the pure monopolist is where:
A. MR = MC
B. MR > MC
C. MR < MC
D. P < AC
Answer : A

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

37. In monopolistic competition, if a firm lowers its price, the rival firms will:
A. Also lower their prices
B. Increase their prices
C. Show no reaction
D. None of the above
Answer : A

38. In the long run:
A. All factors can be used in different proportions
B. Management can be re-organized
C. A firm can experience returns to scale
D. All of the above
Answer : D

39. On a straight line demand curve, elasticity of demand at the midpoint is:
A. Equal to zero
B. Equal to one
C. Equal to infinity
D. More than one
Answer : B

40. In the short-run, in which one of the following situations would a competitive seller close down (shut-down)?
A. When he cannot produce at an economic profit
B. When price falls short of average variable cost at every level of output
C. When price falls short of average fixed cost at every level of output
D. When price falls short of average total cost at every level of output
Answer : B

41. Cross-elasticity of demand or cross-price elasticity between two perfect substitutes will be:
A. Negative
B. Positive
C. Infinite
D. Zero
Answer : C

42. 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

43. 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

44. In monopoly:
A. The producer will often produce a volume that is less than the amount which would maximize the social welfare.
B. The producer will often produce a volume that is more than the amount which would maximize the social welfare.
C. The consumers will often consume a volume that is more than the amount which would maximize the social welfare.
D. None of the above
Answer : A