Basics of Economics MCQ Solved Paper for UPSC IES

1. For a few products such as insulin for diabetics,:
A. The demand curve can be upward sloping
B. The price elasticity of demand could be zero
C. The price elasticity of demand could be greater than one
D. None of the above
Answer : B

2. Consumer surplus is the difference between
A. Price demanded and price paid
B. Price quoted and price actually paid
C. Price that a consumer is willing to pay and the price actually paid
D. None of the above
Answer : C

3. The reserve capacity in administration is advocated on the ground that demand for a product will:
A. Decrease in the future
B. Increase in the future
C. Remain constant
D. None of the above
Answer : B

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

5. The cost of firms in cournot model are:
A. identical
B. differential
C. very high
D. very low
Answer : A

6. In centralized cartel, the firms are like:
A. Price takers
B. Price setters
C. Price discriminators
D. None of the above
Answer : A

7. All the firms with identical costs under perfect competition well, in the long-run, earn only:
A. Normal profits
B. Abnormal profits
C. Differential profits
D. No profits
Answer : A

8. Perfect competition implies:
A. Differentiated goods
B. Homogeneous goods
C. Advertised goods
D. Distress sale of goods
Answer : B

9. If a straight line supply curve makes an intercept on the Y-axis, elasticity of supply is:
A. Equal to unity
B. Less than unity
C. More than unity
D. Zero
Answer : C

10. Any straight line supply which cuts the x-axis will have:
A. Zero elasticity
B. An elasticity greater than one
C. Unitary elasticity of supply
D. An elasticity less than one
Answer : B

11. Even in the long-run equilibrium, the pure monopolist can make abnormal profits because of:
A. Advertising
B. His low LAC
C. Blocked entry
D. High price he charges
Answer : C

12. An indifference curve slopes down towards right since more of one commodity and less of another result in:
A. Same satisfaction
B. Greater satisfaction
C. Maximum satisfaction
D. Decreasing expenditure
Answer : A

13. Each firm in cournot model assumes that its competitor will:
A. change its output
B. not change its output
C. change its price
D. not change its price
Answer : B

14. 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

15. Scarcity is:
A. A relative term
B. An economic term
C. A dynamic term
D. As a whole term
Answer : A

16. Consumers are likely to get a variety of similar goods under:
A. Monopoly
B. Perfect competition
C. Duopoly
D. Monopolistic competition
Answer : D

17. Whish of the following represents the average revenue curve of a firm?
A. The curve representing the cost per unit of output
B. The demand curve of consumers for the firms product
C. Total receipts realized by the firm
D. All of the above
Answer : B

18. A significant property of the Cobb-Douglas production function is that the elasticity of substitution between inputs is:
A. Greater than one
B. Less than one
C. Zero
D. Equal to one
Answer : D

19. Traditionally, the study of determination of price is called:
A. Theory of price
B. Theory of value
C. Theory of labor
D. Theory of cost
Answer : B

20. If money income is given then consumer is in equilibrium when:
A. MU < P
B. MU >P
C. MU = P
D. MU = 0
Answer : C

21. When the law of demand operates the demand curve:
A. Slopes downward
B. Slopes upward
C. Becomes horizontal
D. Becomes vertical
Answer : A

22. Supply and demand changes have their most rapid impact in:
A. Auction market
B. Contract markets
C. Market for commercial office space
D. Natural gas market
Answer : A

23. In the case of superior (normal) commodity, the income elasticity of demand is:
A. Positive
B. Unitary
C. Negative
strong>D. Infinite
Answer : A

24. 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

25. Indifference curve represents:
A. Only two commodities
B. Only three commodities
C. More than three commodities
D. Any number of commodities
Answer : A

26. In joint-profit maximization cartel, central agency sets the:
A. Output
B. Input
C. Demand
D. Price
Answer : D

27. 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

28. The market demand for any commodity is the:
A. Average requirement for it in any given place
B. Amount of it wanted at any given price
C. Amount that people would like to buy during a period at different prices
D. Quantity needed to maintain a given standard of living
Answer : C

29. In Prisoners Dillemma, the players are:
A. Industrialists
B. Prisoners
C. Common men
D. Workers
Answer : B

30. 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

31. If the price of Pepsi Cola goes down, you would predict:
A. An increase in supply of coca cola
B. A decrease in supply of coca cola
C. An increase in demand for coca cola
D. A decrease in demand for coca cola
Answer : D

32. Total Utility (TU) curve:
A. Always rises
B. Always falls
C. First falls and then rises
D. First rises and then falls
Answer : D

33. When in a market, the number of buyers is very large and the number of sellers is very small, it is known as:
A. Monopoly
B. Oligopoly
C. Imperfect competition
D. Perfect competition
Answer : B

34. 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

35. 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

36. If a firm is producing output at a point where diminishing returns have set in, this means that:
A. Each additional unit of output will be more expensive to produce
B. Each additional unit of output will require increasing amount of inputs
C. Marginal product of the variable factor of production decreases as the quantity increases
D. All of the above
Answer : D

37. Who is the author of Trade Cycle ?
A. R.Nurkse
B. R.C.Mathews
C. W.A.Lewis
D. K.N.Raj
Answer : B

38. If X and Y are close substitutes, a fall in price of X will lead to:
A. Increase in demand for Y
B. Decrease in demand for Y
C. Increase in demand for both X and Y
D. Increase in demand for Y
Answer : B

39. If a good is an inferior good then an increase in incomes of the consumers will:
A. Increase demand for the good
B. Increase supply of the good
C. Reduce the equilibrium price of the good
D. None of the above
Answer : C

40. The main contribution of David Ricardo is in the field of:
A. Wages of labor
B. Factor pricing
C. Theory of rent
D. Determination of the rate of interest
Answer : C

41. Identify the author of The Principles of political Economy and Taxation:
A. Alfred Marshal
B. J.S.Mill
C. David Ricardo
D. A.C.Pigou
Answer : C

42. A firm can never produce in the middle area of input space, in case of:
A. Concave isoquant
B. Convex isoquant
C. Constant isoquant
D. None of the above
Answer : A

43. 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

44. If less is demanded at the same price or same quantity demanded t a lower price, it is a case of:
A. Contraction of demand
B. Decrease in demand
C. Increase in demand
D. Extension of demand
Answer : B

45. At a point where a straight line demand curve meets the price axis (Y-axis), the elasticity of demand is:
A. Equal to one
B. Less than one
C. Equal to zero
D. Equal to infinite
Answer : D

46. 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

47. The long-run AC curve is constructed from:
A. The minimum points on all short-run AC curves
B. The lowest points on the short-run MC curve
C. The minimum points on the short run AVC curves
D. It has nothing to do with the short-run cost curves
Answer : A

48. The budget-line is also known as the:
A. Iso-utility curve
B. Production possibility line
C. Isoquant
D. Consumption possibility line
Answer : D

49. The modern cost curves are based upon the idea of:
A. Fixed capacity
B. Specific capacity
C. Excess capacity
D. Reserve capacity
Answer : D

50. Contraction of demand means:
A. Less quantity demanded at the same price
B. Less quantity demanded at a higher price
C. Less quantity demanded at a lower price
D. None of the above
Answer : B