CAT - Basics of Economics 1000+ MCQ [Solved] PDF Download

1. 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

2. Elasticity (E) expressed by the term, 1>E>0, is:
A. Perfectly elastic
B. Relatively elastic
C. Unitary elastic
D. Relatively inelastic
Answer : D

3. Moving down along a linear demand curve:
A. Demand becomes less elastic
B. Elasticity does not change
C. Demand has unitary elasticity
D. Demand becomes more elastic
Answer : A

4. In price leadership, like leader, the follower firm may:
A. also maximize its profits
B. not maximize its profits
C. maximize its costs
D. none of the above
Answer : B

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

6. 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

7. Which is not an essential feature of a socialist economy?
A. Social ownership of the means of production
B. Freedom of enterprise
C. Use of centralized planning
D. Government decisions
Answer : B

8. The Modern and Neo-Keynsian Theory of Interestwas presented by:
A. Gunner Myrdal
B. A.C.Pigou
C. J.M.Keynes
D. J.R.Hicks
Answer : D

9. 7.The costs which the firms have to face in order to change the price tags of their products and services are called:
A. Product costs
B. Real costs
C. Menu costs
D. Nominal costs
Answer : C

10. An effective price ceiling usually results in:
A. Excess demand
B. Qd > Qs
C. Shortage of supply
D. All of the above
Answer : D

11. By scarcity the economist means that all goods are scarce relative the peoples:
A. Desire for them
B. Purchases
C. Production
D. Consumption
Answer : A

12. 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

13. In discriminating monopoly (price discrimination), the elasticity of demand of product in two markets are:
A. Different
B. Same
C. Zero
D. None of the above
Answer : A

14. In economist the term invisible hand is refers to:
A. Hand of God
B. Market self regulating system
C. Hands of invisible people
D. Regulations of government
Answer : B

15. Normally when price per unit of time falls:
A. Quantity demanded increases
B. Quantity demanded decreases
C. Quantity demanded remains constant
D. Quantity demanded becomes zero
Answer : A

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. Income-demand curve shows:
A. Income-expenditure relationship
B. Income-cost relationship
C. Income-price relationship
D. Income-quantity relationship
Answer : D

18. Identify the work of Irving Fisher:
A. Policy on trade
B. Policy against inflation
C. The making of index numbers
D. Labor theory
Answer : C

19. In substitution effect, we:
A. Move to another indifference curve
B. Move along given indifference curve
C. Move to a higher indifference curve
D. Move to a lower indifference curve
Answer : B

20. At low prices, demand is likely to be:
A. More elastic
B. Less elastic
C. Unit elastic
D. Perfectly inelastic
Answer : B

21. The water diamond paradox was firstly resolved with the help of:
A. Labor theory of value
B. Individual theory of value
C. Producer theory of value
D. Consumer theory of value
Answer : A

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

23. Price elasticity of demand can be measured in the following way:
A. Percentage change in quantity demanded of a commodity divided by percentage change in price of that commodity
B. Change in quantity demanded of a commodity divided by changein price of that commodity
C. Percentage change in price of a commodity divided by percentage change in quantity demanded of that commodity
D. None of that commodity
Answer : A

24. In case of monopoly, the price charged against the additional unit is:
A. Not different
B. Same
C. Not same
D. Zero
Answer : C

25. 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

26. Equilibrium of a discriminating monopolist requires the fulfillment of which one of the following conditions?
A. It must be profitable to him to sell output in more than one market
B. Marginal revenue in both markets must be the same
C. Marginal revenue in both markets must also be equal to the marginal cost of producing the monopolists aggregate output
D. All the above
Answer : D

27. 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

28. If there are many producers, each of whom has an individual production possibility curve, then the lowest marginal cost producer of good X is the producer:
A. Who must sacrifice fewer units of every other goods than any other producer
B. Who can produce more X per hour than any other producer
C. Who must sacrifice more units of every other goods than any other producer
D. None of the above
Answer : A

29. In case of monopoly, the slope of MR is:
A. Always three times than the slope of AR
B. Always double than the slope of AR
C. Always equal to the slope of AR
D. None of the above
Answer : B

30. 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

31. The difference between accounting profits and economic profits is:
A. Implicit costs
B. Explicit costs
C. Fixed costs
D. Variable costs
Answer : A

32. Profits of a firm will be calculated taking into account the units produced and the difference between:
A. Real cost and money cost
B. Variable cost and fixed cost
C. Average cost and average revenue
D. Marginal cost and average cost
Answer : C

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

34. 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

35. 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

36. When elasticity of demand is one (e=1), then following the formula MR=P[1-1/e], the MR will:
A. Positive
B. Negative
C. Zero
D. None of the above
Answer : C

37. The isoquant approach is:
A. Classical approach
B. Keynesian approach
C. Neo-classical approach
D. Modern approach
Answer : C

38. Under the perfect competition, the transportation cost:
A. Is considered to be negligible and thus ignored
B. Is considered to be vital for the calculation of total cost
C. Is charged along with the price of the commodity
D. None of the above
Answer : A

39. In the short-run, the competitive firm can maximize its profits (or minimize its losses) by:
A. Equating price and marginal revenue
B. Equating price and average total cost
C. Increasing marginal cost and lowering fixed costs
D. Equating marginal cost and marginal revenue
Answer : D

40. If a new production technology for producing compact discs is developed and new firms are attracted to this field:
A. The supply curve will shift down or right
B. The supply curve will shift up or left
C. Both demand and supply curve shifts would occur
D. None of the above
Answer : A

41. The production function can convey to a firm:
A. The cost of producing any given output
B. The various combinations of input that could be employed in production of any given quantity of output
C. The various combinations of input that should be used in producing any given quantity of output in an efficient manner
D. The maximum profit level of output
Answer : B

42. If a monopolist is producing under decreasing cost conditions, increase in demand is beneficial to the society because:
A. Consumers get better quality goods
B. Cost of production falls and hence price will follow
C. Goods will be sold in many markets
D. None of the abov
Answer : B

43. Marginal utility equals:
A. Slope of total utility curve
B. Slope of average utility curve
C. Slope of marginal utility curve
D. Slope of total revenue curve
Answer : A

44. Under perfect competition, at equilibrium, marginal cost is:
A. Less than marginal revenue
B. Equal to marginal revenue
C. More than marginal revenue
D. None of the above
Answer : B

45. Capital and Development Planning is the work of:
A. S.Chakravarty
B. J.S.Mill
C. A.C.Pigou
D. F.W.Taussig
Answer : A

46. According to Chamberlin, the activity of a monopolistic competitive firm:
A. Get noticed by the rival firms
B. Get unnoticed by the rival firms
C. Get noticed by the employees of the rival firms
D. None of the above
Answer : B

47. Marshallian demand function is also known as:
A. Utility demand function
B. Compensated demand function
C. Collective demand function
D. Relative demand function
Answer : B

48. The pay-off matrix shows:
A. Possible outcomes
B. Possible benefits
C. Possible losses
D. None of them
Answer : A

49. In the theory of firm, Chamberline presented the idea of:
A. Rising cost
B. Falling cost
C. Rising input
D. Falling input
Answer : B

50. Quantity demanded or supplied is measured in:
A. Monetary units
B. Physical units
C. Relative units
D. Constant units
Answer : B