B.CAT Economics MCQs

Economics
(Micro Economics)
Ch. # 1
ECONOMICS BASIC CONCEPTS
MCQs
Q.No.1 Select suitable answer:
1. Who is thought ton be the father of economics?

(a) Alfred marshal (c) J.M.keynes
(b) Adam smith (d) J.R.hichs
2. According to Alfred marshal Economics is
(a) A social science (c) A natural science
(b) Both of the above (d) None of the above
3. According to Robbins, Economics is:
(a) value oriented (c) value neutral
4. Economics in general, is considered to be :
(a) A positive science (c) A normative science
(b) An art (d) All of the above
5. Micro Economics deals with:
(a) Behaviour of individual consumers and firms
(b) Determine of prices of individual commodities
(c) Allocation of resources
(d) All of the above
6. Macro Economics discusses:
(a) National income (c) Employment level in the Economy
(b) General price level in the Economy (d) All of the above
7. Micro Economics and macro Economics are:
(a) Substitutes (c) complements
8. All of the following are Economic problems except:
(a) What to produce (c) How to produce
(b) When to produce (d) For whom to produce
9. Economics laws are:
(a) Physical laws (c) Moral laws
(b) Statutory laws (d) All of the above
10. Macro Economics is that branch of Economics which deals with:
(a) Individual producers (c) Individual consumers
(b) The Economy as a whole (d) Individual markets
11. Economics is the branch of _________ Science.
(a) Social (c) Physical
(b) Spiritual (d) All of them.
12. The study of an individual is possible in _________Economics.
(a) Macro (c) Micro
(b) Islamic (d) Mathematical
13. The study of whole economy is possible in _________ Economics.
(a) Macro (c) Micro
(b) Islamic (d) Mathematical.
14. Prof.___________ is classical economist.
(a) Robins (c) Marshall
(b) Adam Smith (d) Keens.
15. Prof. Marshall is ___________ Economist.
(a) Classical (c) New Classical
(b) Modern (d) Old
16. ___________ belongs with Modern School of thought.
(b) Adam Smith (d) Ricardo
17. According to ___________”Economics is the study of Wealth.
(a) Adam Smith (c) Marshall
(b) Robins (d) Keens
Economics
18. The concept of limited resources & multiplicity of wants was introduced by
Prof___________.
(b) Adam Smith (d) Keens
19. The term material welfare was presented by Prof. ___________.
(b) Robins (d) None of them
20. Economic laws are ___________ in nature.
(a) Conditional (c) Non-conditional
(b) fixed (d) Indefinite.
21. In economics the economic agents are ___________ & ___________.
(a) Human being & Individuals (c) Consumer & Producer
(b) Consumer & human being (d) All of them.
22. ___________ creates material welfare
(a) Doctor (c) Lawyer
(b) Carpenter (d) None of them.
23. The name of the book written by Adam Smith is ___________.
(a) Wealth of Nation (c) Study of Economics
(b) Laws of Economics (d) Wealth & Nation
24. The resources in an economy:
(a) Are always fixed (c) Can never decrease
(b) Always increase over time (d) Are limited at any moment in time
25. Human wants are:
(a) Always fixed (c) Limited
(b) Unlimited (d) Likely to decrease over time
26. The sacrifice involved when you choose a particular course of action is called the:
(a) Alternative (c) Opportunity cost
(b) Consumer cost (d) Producer cost
27. Which one of the following is not one of the basic economic questions?
(a) What to produce (c) Who to produce for
(b) How to produce (d) How to minimize economic growth
28. The basic economic problems will not be solved by:
(a) Market forces
(b) Government intervention
(c) A mixture of government intervention and the free market
(d) The creation of unlimited resources
29. The free market involves:
(a) The free provision of products
(b) The subsidising of products by the government
(c) Market forces of supply and demand
(d) All trade via barter
30. A mixed economy:
(a) Allocates resources via supply but not demand
(b) Allocates resources via demand but not supply
(c) Allocates resources via supply and demand
(d) Allocates resources via market forces and government intervention
31. Which of the following is NOT likely to be true in a command economy?
(a) Businesses may pursue social objectives
(b) The profits of a business belong to the government
(c) Resources are allocated by government directives
(d) Market forces determine what is produced and who receives the products
32. The public sector includes:
(a) Investors owning companies (c) Government ownership of assets
(b) Market forces of supply and demand (d) Private enterprise
33. Which of the following is a normative statement in economics?
(a) More spending by the government reduces poverty
(b) Higher taxes lead to less desire to work
(c) The UK economy is growing fast relative to other European Union members
(d) The government should concentrate on reducing unemployment
Economics
34. If an economy is productively efficient:
(a) Everyone is wealthy
(b) Resources are unemployed
(c) More of one product can only be produced if less of another product is produced
(d) The distribution of income is equal
35. Economic growth can be shown by:
(a) An inward shift of the production possibility frontier
(b) A movement along the production possibility frontier
(c) An outward shift of the production possibility frontier
(d) A decision by the government to produce inside the production possibility frontier
36. As resources are shifted from one industry to another this can be shown by:
(a) An inward shift of the production possibility frontier
(b) A movement along the production possibility frontier
(c) An outward shift of the production possibility frontier
(d) The pivoting of the production possibility frontier
37. In a free market the combination of products produced will be determined by:
(a) Market forces of supply and demand (b) The government
(c) The law (d) The public sector
38. If an economy moves from producing 10 units of A and 4 units of B to producing 7 As and
5Bs, the opportunity cost of the 5th B is:
(a) 7As (c) 10As
(b) 3As (d) 1A
39. An economy may operate outside the Production Possibility Frontier if:
(a) It is not utilizing its resources fully
(b) It is being productively efficient
(c) It is a mixed economy
(d) It is trading with other economies
40. The resources in the economy do not include:
(a) Demand (c) Land
(b) Labour (d) Capital
41. The resources in an economy are:
(a) Constantly increasing
(b) Fixed at any moment
(c) Constantly decreasing
(d) Able to be transferred easily between industries
42. Any combination of products inside the production possibility frontier is:
(a) Allocatively inefficient (c) X inefficient
(b) Consumer inefficient (d) Productively inefficient
43. An outward shift of the production possibility frontier may be caused by:
(a) An increase in demand (c) More government spending
(d) Better training of employees (d) Productive inefficiency
Answer Key
S.# Ans S.# Ans S.# Ans S.# Ans S.# Ans
1. 11. 21. 31. 41.
2. 12. 22. 32. 42.
3. 13. 23. 33. 43.
4. 14. 24. 34.
5. 15. 25. 35.
6. 16. 26. 36.
7. 17. 27. 37.
8. 18. 28. 38.
9. 19. 29. 39.
10. 20. 30. 40.
Economics
Ch. # 2
DEMAND
MCQs
1. The demand curve for normal goods:
(a) slopes positively (c) Remains parallel to Y-axis
(b) slopes negatively (d) Remains parallel to X-axis
2. when quantity demand of a good increases as a result of price fall this is Known:
(a) Rise in demand (c) fall in demand
(b) extension of demand (d) contraction of demand
3. A decrease in the price of a substitutes commodity will do which of the following:
(a) Shift the demand curve upwards (c) Shift the demand curve downwards
(b) Leave the demand curve unchanged (d) All of the above
4. A curve showing relationship between income of the consumer and quantity demand of a
normal good has:
(a) Positive slope (c) Negative slope
(b) Zero slope (d) infinite slope
5. An increase in the price of a complementry good will:
(a) Shift the demand curve upwards (c) Shift the demand curve down wards
(b) Not shift the demand curve at all (d) None of the above
6. When a complement and a substitute of a good become cheaper and expensive
respectively. The demand for the good will:
(a) Rise (c) Fall
(b) Stay the same (d) None of the Above
7. Responsiveness of quantity demand of a good to changes in its price is known as:
(a) law of demand (c) Price elasticity of demand
(b) Income elasticity of demand (d) None of the above
8. Income elasticity for normal and superior good is:
(a) Positive (c) Negative
(b) None of the above (d) Any of the above
9. Demand for luxuries goods is:
(a) Highly elastic (c) Elastic
(b) Less elastic (d) Inelastic
10. If a government wants to substantially raise tax revenue with very little effect on output is
shouid tax.
(a) Suzuki cars (c) Economic text books
(b) food stuffs (d) Luxuries
11. A change in quantity demanded resulting from a change in price of the commodity is
known as:
(a) change in quantity demanded (c) change in demand
(b) Change in income (d) Change in taste
12. When expenditure of a consumer increases as a result of price decrease the price
elasticity of demand will be:
(a) Greater than unity (c) Less than unity
(b) Equal to unity (d) Zero
13. If percentage change in quantity demand is greater than percentage change in price the
price elasticity of demand will be:
(a) Equal to unity (c) less than unity
(b) Greater than unity (d) Zero
14. A ten percent reduction in the price of their life buoy by lever brother results in 20 percent
more sales. The price elasticity of demand will be:
(a) -2.0 (c) -0.2
(b) -0.5 (d) -20
15. Demand is the sum of __________.
(a) Desire & Wish (c) Desire & Utility
(b) Desire & Ability
16. Price & Quantity demand are __________.
(a) Inverse (c) Direct
(b) Positive (d) All of them
17. Income & demand are __________ related.
(a) Direct (c) Inverse
(b) Negative (d) All of them
Economics
18. Demand is __________.
(a) Measurable (c) Linked
(b) Elastic (d) All of them
19. For __________ good demand is inelastic.
(a) Necessary (c) Luxurious
(b) Nothing (d) All of them
20. For luxurious goods demand is __________.
(a) Elastic (c) Inelastic
(b) Negative elastic (d) All of them
21. Change in quantity demand depends upon __________.
(a) Price (c) Income
(b) Fashion (d) None of them
22. Change in demand depends upon __________.
(a) Price (c) Income
(b) None of them (d) All of them
23. Demand & Desire are __________ concepts.
(a) Same (c) Different
(b) dual (d) Two
24. For substitutes Gross elasticity of demand is __________.
(b) Zero (d) Nothing
25. For complementary goods gross elasticity of demand is __________.
(a) Positive (c) Zero
(b) Negative (d) All of them
26. Which best describes a demand curve?
(a) The quantity consumers would like to buy in an ideal world
(b) The quantity consumers are willing to sell
(c) The quantity consumers are willing and able to buy at each and every income all
other things unchanged
(d) The quantity consumers are willing and able to buy at each and every price all other
things unchanged
27. A fall in price:
(a) Will cause an inward shift of demand
(b) Will cause an outward shift of supply
(c) Leads to a movement along a demand curve
(d) Leads to a higher level of production
28. Demand for a normal product may shift outwards if:
(a) Price decreases (c) The price of a substitute rises
(b) The price of a complement rises (d) Income falls
29. According to the law of diminishing marginal utility:
(a) Utility is at a maximum with the first unit
(b) Increasing units of consumption increase the marginal utility
(c) Marginal product will fall as more units are consumed
(d) Total utility will rise at a falling rate as more units are consumed
30. If marginal utility is zero:
(a) Total utility is zero
(b) An additional unit of consumption will decrease total utility
(c) An additional unit of consumption will increase total utility
(d) Total utility is maximized
31. A decrease in income should:
(a) Shift demand for an inferior product inwards
(b) Shift demand for an inferior product outwards
(c) Shift supply for an inferior product outwards
(d) Shift supply for an inferior product inwards
32. An increase in the price of a complement for product A would:
(a) Shift demand for product A outwards
(b) Shift demand for product A inwards
(c) Shift supply for product A outwards
(d) Shift supply for product A inwards
33. An increase in price, all other things unchanged, leads to:
(a) Shift demand outwards (c) Shift demand inwards
(b) A contraction of demand (d) An extension of demand
Economics
34. If a product is a Veblen good:
(a) Demand is inversely related to income
(b) Demand is inversely related to price
(c) Demand is directly related to price
(d) Demand is inversely related to the price of substitutes
35. If a product is an inferior good:
(a) Demand is inversely related to income
(b) Demand is inversely related to price
(c) Demand is directly related to price
(d) Demand is directly related to the price of substitutes
36. Average income increases from Rs.20,000 p.(a) to Rs.22,000 p.(a) Quantity demanded
per year increases from 5000 to 6000 units. Which of the following is correct?
(a) Demand is price inelastic (c) The good is inferior
(b) Income elasticity is -2 (d) The product is normal
37. The price decreases from Rs.2,000 to Rs.1,800. Quantity demanded per year increases
from 5000 to 6000 units. Which of the following is correct?
(a) The price elasticity of demand is -2 (c) The good is inferior
(b) Income elasticity is + 0.5 (d) Income elasticity is + 2
38. If the price elasticity of demand is unit then a fall in price:
(a) Reduces revenue (c) Leaves revenue unchanged
(b) Increases revenue (d) Reduces costs
39. If the cross elasticity of demand is -2:
(a) The products are substitutes and demand is cross price elastic
(b) The products are substitutes and demand is cross price inelastic
(c) The products are complements and demand is cross price elastic
(d) The products are complements and demand is cross price inelastic
40. The income elasticity is +2 and income increases by 20%. Sales were 5000 units, what
will they be now?
(a) 3000 (c) 7000
(b) 5500 (d) 4500
41. The price elasticity of demand is a negative number this means:
(a) Demand is price elastic
(b) Demand is price inelastic
(c) The demand curve is downward sloping
(d) An increase in income will reduce the quantity demanded
42. Price increases from 10 to 12 pence and the price elasticity of demand is -0.5. The
quantity demanded was 500 units. What will it be now?
(a) 550 units (c) 500 units
(b) 450 units (d) 490 units
43 If demand is price inelastic:
(a) An increase in price must raise profits (c) An increase in price decreases
revenue
(b) An increase in price increases revenue (d) A decrease in price reduces sales
44. For an inferior good:
(a) The price elasticity of demand is negative; the income elasticity of demand is
negative.
(b) The price elasticity of demand is positive; the income elasticity of demand is
negative.
(c) The price elasticity of demand is negative; the income elasticity of demand is
positive.
(d) The price elasticity of demand is positive; the income elasticity of demand is positive.
45. For a normal good:
(a) The price elasticity of demand is negative; the income elasticity of demand is
negative.
(b) The price elasticity of demand is positive; the income elasticity of demand is
negative.
(c) The price elasticity of demand is negative; the income elasticity of demand is
positive.
(d) The price elasticity of demand is positive; the income elasticity of demand is positive.
Economics
Answer Key
1. 11. 21. 31. 41.
2. 12. 22. 32. 42.
3. 13. 23. 33. 43.
4. 14. 24. 34. 44.
5. 15. 25. 35. 45.
6. 16. 26. 36.
7. 17. 27. 37.
8. 18. 28. 38.
9. 19. 29. 39.
10. 20. 30. 40.
Ch. # 3
SUPPLY
MCQs
Select the most suitable answers
1. Other things remaining the same the sellers tend to sell more at higher prices and less at
lower prices. This is known as:
(a) Law of demand
(b) Law of diminishing marginal utility
(c) Law of market
(d) Law of supply
2. normally a supply curve:
(a) Slopes positively (c) Slopes negatively
(b) Is parallel to X-axis (d) Is parallel to Y-axis
3. Increase in quantity supplied of a good as a result of a price increase is:
(a) Rise in supply (c) fall in supply
(b) Extension of supply (d) contraction of supply
4. law of supply explains the relation ship between quantity supplied: and
(a) Input prices
(b) Price of raw material
(c) Price of the commodity under consideration
5. An increase in quantity supplied of a commodity resulting from a fall in the price of raw
material will be:
(a) Arise in quantity (c) A fall in quantity supplied
(b) A rise in supply (d) A fall in supply
6. An improvement in technology will do which of the following:
(a) Shift the supply curve rightwards (c) Shift the supply curve leftwards
(b) None of the above (d) All of the above
7. A supply curve explains:
(a) Minimum prices that the suppliers require for various quantities supplied
(b) Maximum quantities that the seller will offer at various prices
(c) Both of the above
(d) None of the above
8. Supply is the part of ___________.
(a) Wealth (c) Income
(b) Stock (d) Price
9. Supply is directly related with ___________.
(a) Income (c) Wealth
(b) Price (d) None of them
10. Supply curve is ___________ shape.
(a) Negative shape (c) Positive shape
(b) Vertical (d) Horizontal
Economics
11. The part of stock sold in the market at certain price is ___________.
(a) Supply (c) Property
(b) Supply (d) None of them
12. In Economic ___________ & ___________ are main forces.
(a) Demand & Supply (c) Demand & Price
(b) Supply & Price (d) All of them
13. Demand & Supply determines ___________.
(a) Price (c) Normal price
(b) Market Price (d) Income
14. Supply depends upon ___________.
(a) Income (c) Population
(b) Demand (d) All of them
15. Which best describes a supply curve?
(a) The quantity consumers would like to buy in an ideal world
(b) The quantity producers are willing and able to sell at each and every price all other
things unchanged
(c) The quantity producers are willing and able to sell at each and every income all other
things unchanged
(d) The quantity producers are willing and able to sell at each and every point in time all
other things unchanged
16. If a 4% increase in price leads to a increase in the quantity supplied of 8%:
(a) Supply is price elastic (c) Supply is income elastic
(b) Price elasticity of demand is -2 (d) Price elasticity of supply is -2
17. Supply is likely to be more price elastic:
(a) In the short run rather than the long run
(b) If factors of production are relatively immobile between industries
(c) If there are very few producers
(d) If it is easy to expand output
18. A supply curve that starts at the origin has:
(a) A price elasticity of supply greater than one
(b) A price elasticity of supply equal to one
(c) A price elasticity of supply less than one
(d) A positive price elasticity of supply
19. A contraction in supply occurs when:
(a) Demand shifts outwards
(b) The supply curve shifts inwards
(c) The quantity supplied falls when the price falls
(d) The supply curve shifts outwards
20. An increase in the costs of production will:
(a) Shift demand outwards
(b) Shift demand inwards
(c) Shift supply outwards so more is supplied at each and every price, all other things
unchanged
(d) Shift supply inwards
21. An increase in price, all other things unchanged, leads to:
(a) A shift in supply outwards (c) A shift in supply inwards
(b) A contraction of supply (d) An extension of supply
22. An increase in productivity should:
(a) Lead to a contraction of supply
(b) Lead to an expansion of supply
(c) Lead to a shift in supply outwards (i.e. more supplied at each and every price)
(d) Lead to an inward shift in supply
23. An increase in price from 25 pence to 30 pence leads to an increase in the quantity
supplied from 40 units to 44 units. The price elasticity of supply is:
(a) + 2 (c) + 0.5
(b) - 2 (d) - 0.5
24. The price elasticity of supply is +4. The price increases by 15%. Sales were originally 200
units. What will they be now?
(a) 80 units (c) 320 units
(b) 60 units (d) 120 units
Economics
Answer Key
1. 6. 11. 16. 21.
2. 7. 12. 17. 22.
3. 8. 13. 18. 23.
4. 9. 14. 19. 24.
5. 10. 15. 20.
Ch. # 4
PRICE DETERMINATION
MCQs
1. Equilibrium price is that price:
(a) At which markets clears
(b) At which quantity demand is equal to quantity supplied
(c) At which there is no excess demand
2. Equilibrium quantity is that quantity which is:
(a) Demand at the equilibrium price
(b) Supplied at the equilibrium price
(c) Demanded and supplied at the equilibrium price
(d) Any of the above
3. At a price higher than the equilibrium price demand will be:
(a) More than supply (c) Any of the above
(b) Less than supply (d) Equal to supply
4. If quantity demand is more than quantity supplied it means that the existing price is:
(a) Higher than the equilibrium price (c) Any of the above
(b) Lower than the equilibrium (d) Equal to equilibrium[price
5. A rise in demand will do which of the following;
(a) Reduce the equilibrium price
(b) Any of the above
(c) Raise the equilibrium price
(d) Leave the equilibrium price unchanged
6. The fall in supply will
(a) Increase the equilibrium quantity (c) Any of the above
(b) Decrease the equilibrium quantity (d) Not change the equilibrium quantity
7. Suppose the market for .Disprin’ is in equilibrium. A new medical research discovers its
severe side effects. If nothing else changes. The new equiliobrium will be associated
with:
(a) An outward shift of supply curve (c) An inward shift of supply curve
(b) An inward shift of demand curve (d) An outward shift of demand curve
8. Demand and supply both rise by 10percent.the new equilibrium price will be:
(a) Higher than the old one (c) Lower than the old one
(b) No different from the old one (d) None of the above
9. Demand rises and supply falls by 10percent.the new equilibrium price will be:
(a) Greater than the old one (c) Smaller than the old one
(b) The same (d) None of the above
10. The imposition of a sale tax will shift:
(a) The demand curve down ward
(b) The supply curves in wards
(c) The supply curves out wards
(d) The supply curve inwards and the demand curves down wards.
11. A subsidy given by the government will shift
(a) The demand curve
(b) The supply curve
(c) Both the supply and demand curves
(d) Neither the supply nor the demand curve.
Economics
12. The market period supply curve of perishable goods is:
(a) A vertical line (c) A horizontal line
(b) Apositively slopped line (d) Any of the above
13. Suppose equilibrium price is 10and equilibrium quantity is 50.Demand and
supply both increase by 10 percent. The new equilibrium quantity will be:
(a) 10 Percent (c) 55
(b) Any of the above (d) None of the above
14. In the preceding problem, the equilibrium price will:
(a) Increase (c) Decrease
(b) Remain the same (d) None of the above
15. New equilibrium price will be:
(a) Higher than the old one (c) Lower than the old one
16. The New equilibrium Quantity will be
(a) More than the old one (c) Less than the old one
17. The demand curve will shift:
(a) Up wards (c) Down wards
(b) will not shift (d) None of the above
18. The supply curve will:
(a) Shift right wards (c) Shift left wards
(b) Not shift (d) None of the above
19. If demand increases in a market this will usually lead to:
(a) A higher equilibrium price and output
(b) A lower equilibrium price and higher output
(c) A lower equilibrium price and output
(d) A higher equilibrium price and lower output
20. An increase in income will:
(a) Lead to a movement along the demand curve
(b) Shift the supply curve
(c) Shift the demand curve
(d) Lead to an extension of demand
21. A reduction in the costs of production will:
(a) Lead to a movement along the supply curve
(b) Shift the demand curve
(c) Shift the supply curve
(d) Lead to an extension of supply
22. A shift in supply will have a bigger effect on price than output if demand is:
(a) Income elastic (c) Price elastic
(b) Income inelastic (d) Price inelastic
23. Assuming a downward sloping demand curve and upward sloping supply curve, a higher
equilibrium price may be caused by:
(a) A fall in demand
(b) An increase in supply
(c) Improvements in production technology
(d) An increase in demand
24. If the price was fixed below the equilibrium price there would be:
(a) Excess supply (c) Equilibrium
(b) Excess demand (d) Downward pressure on prices
25. A movement along the demand curve may be caused by:
(a) A change in income (c) A change in advertising
(b) A change in the number of buyers (d) A shift in supply
26. A subsidy paid to producers:
(a) Shifts the supply curve (c) Shifts the demand curve
(b) Leads to a contraction in supply (d) Leads to an extension of supply
27. A movement along the supply curve may be caused by:
(a) A change in technology
(b) A change in the number of producers
(c) A shift in demand
(d) A change in costs
28. The price mechanism cannot:
(a) Act as a signal (c) Act as an incentive
(b) Act as a rationing device (d) Shift the demand curve
Economics
29. Which best describes consumer surplus?
(a) The price consumers are willing to pay for a unit
(b) The cost of providing a unit
(c) The profits made by a firm
(d) The difference the price a consumer pays for an item and the price he/she is willing
to pay
30. In the free market the price mechanism:
(a) Acts as a signal to producers
(b) Can provide an incentive to reallocate resources
(c) Acts as a rationing device
(d) Is set by the government
31. Community surplus equals:
(a) Producer surplus minus consumer surplus
(b) Profits plus utility
(c) Total utility minus plus profit
(d) Consumer surplus plus producer surplus
32. Monopoly power:
(a) Is likely to increase consumer surplus
(b) Is likely to increase community surplus
(c) Is likely to lead to higher producer surplus
(d) Is likely to lead to lower prices and lower output
33. A negative production externality means
(a) The social marginal cost is greater than the private marginal cost
(b) The social marginal benefit is greater than the private marginal cost
(c) The social marginal cost is greater than the private marginal benefit
(d) The social marginal cost is less than the private marginal cost
34. A positive externality occurs when:
(a) The social marginal cost is greater than the private marginal cost
(b) The social marginal benefit is greater than the private marginal benefit
(c) The social marginal cost is greater than the private marginal benefit
(d) The social marginal cost is less than the private marginal cost
35. A merit good
(a) Is a public good
(b) Involves a negative externality
(c) Is overprovided in the free market
(d) Is under provided in the free market
36. A demerit good
(a) Is a public good
(b) Involves a positive externality
(c) Is overprovided in the free market
(d) Is under provided in the free market
37. A public good will probably:
(a) Be underprovided in the free market
(b) Be overprovided in the free market
(c) Not be provided in the free market
(d) Has no opportunity cost
38. Asymmetric information occurs when
(a) Information is free
(b) Buyers and sellers have access to different information
(c) Community surplus is maximized
(d) Community surplus is minimized
39. If the price in a market is fixed by the government below equilibrium:
(a) There is excess equilibrium (c) There is excess supply
(b) There is excess demand (d) There is equilibrium
40. If the price in a market is fixed by the government above equilibrium:
(a) There is excess equilibrium (c) There is excess supply
(b) There is excess demand (d) There is equilibrium
41. Merit goods are:
(a) Not provided in the free market economy
(b) Under provided in the free market economy
(c) Over provided in the free market economy
(d) Provided free
Economics
42. Agricultural prices tend to be unstable because:
(a) Supply is price elastic
(b) Demand is price elastic
(c) Supply is stable
(d) Demand and supply are price inelastic
43. When supply increases in an agricultural market farmer's earnings might fall because:
(a) Supply is price elastic
(b) Demand is price inelastic
(c) The government buys up all the excess production
(d) All output must be sold at a maximum price
44. Which of the following is the government most likely to subsidize?
(a) Negative externalities (c) Positive externalities
(b) Monopolies (d) Oligopolies
45. With a positive externality:
(a) There is under-consumption in the free market
(b) There is over consumption in the free market
(c) The government may tax to decrease production
(d) Society could be made off if less was produced
46. A public good:
(a) Is provided by the government
(b) Is free
(c) Has the properties of being non-excludable and non-diminishable
(d) Has external costs
47. Nationalization occurs when:
(a) The government sells assets to a the private sector
(b) The government bans a product
(c) The government takes ownership of a business
(d) The government taxes a product to a raise its price
48. If a maximum price is set above equilibrium there will be:
(a) A price fall (c) A price increase
(b) Excess supply (d) Excess demand
Answer Key
1. 11. 21. 31. 41.
2. 12. 22. 32. 42.
3. 13. 23. 33. 43.
4. 14. 24. 34. 44.
5. 15. 25. 35. 45.
6. 16. 26. 36. 46.
7. 17. 27. 37. 47.
8. 18. 28. 38. 48.
9. 19. 29. 39.
10. 20. 30. 40.
Ch. # 5
UTILITY
MCQs
1. Marginal utility is the utility derived from the:
(a) First units of a commodity (c) All of the above
(b) Middle unit of a commodity (d) Last unit of a commodity
2. When marginal utility is zero total utility will be:
(a) Maximum (c) Minimum
(b) Middle (d) None of the above
Economics
3. Marginal utility curve:
(a) Slopes negatively (c) Is parallel to x-axis
(b) Slopes positively (d) Is Parallel to y-axis
4. As a consumer goes on consuming more and more units of a conmmodity
Marginal utility:
(a) Increases (c) Decreases
(b) Remain constant (d) None of the above
5. Acording to law of diminishing marginal utility a consumer will be in
equilibrium marginal utility is:
(a) Greater than price (c) Less than price
(b) Equal to the price (d) Any of the above
6. A consumer will get maximum total satisfaction when the utility of last
Penny spent on any commodity is the same for all commodity satisfaction is known as:
(a) law of diminishing marginal utility (c) law of diminishing returns
(b) law of equi-marginal utility (d) All of the above
7. Law of Equi-marginal utility is based on which measurement of utility:
(a) Ordinal measure (c) cardinal measure
(b) Any of the above (d) None of the above
8. Utility is the name of _________.
(a) Satisfaction (c) Ability of satisfaction
(b) Value (d) None of them
9. Utility and advantage are _________.
(a) Same (c) Different
(b) Negative concepts (d) Positive
10. Addition in total utility is called _________ utility.
(a) Initial (c) Marginal
(b) Zero (d) Negative
11. At saturation point marginal utility is _________.
(b) Zero (d) All
12. Total utility always increases with _________. Rate.
(a) Increasing (c) Constant
(b) Decreasing (d) Zero
13. The utility from fruits and vegetables is _________.
14. The utility from smoking is _________.
(a) Negative (c) Positive
15. When the marginal utility from different items is same then total utility becomes
_________.
(a) Same (c) Maximum
(b) Zero (d) Negative
16. The Utility from first glass of water is _________. Utility.
(a) Marginal (c) Total
(b) Initial (d) Zero
17. Law of diminishing marginal utility applies on _________.
(a) Food (c) Drink
(b) Nothing (d) Both
Answer Key
1. 5. 9 13. 17.
2. 6. 10. 14.
3. 7. 11. 15.
4. 8. 12. 16.
Economics
Ch. # 6
FACTORS OF PRODUCTION
MCQs
1. A production mean
a) Creation or enchancement of utility (c) Transformation
b) Any of the above (d) None of the above
2. A product good is that good which is mean to;
(a) Provide utility to the consumer (c) Help in production
(b) Be consumed by producer (d) All of the above
3. Which of the following is not a factor of production.
(a) Land (c) Labour
(b) Capital (d) Rent
4. Which of the following is not a factor of Income
(a) Rent (c) Interest
(b) Price of the final commodity (d) Wage
5. Land as a factor of production means:
a) Only soil that is used for cultuation
b) Forests and mines only
c) Any natural resourse gifted by nature free of cost
d) Any of the above
6. The most important use of land is in:
(a) Industry (c) Agriculture
(b) Services sector (d) All of the above
7. Reward of labour is:
(a) Rent (c) Profit
(b) Interest (d) Wage
8. Which of the following would increase labour productivity:
(a) provision of education and training
(b) provision of better environment of work
(c) Use of modern machines
9. Which of the following would increase labour force in a country:
(a) allowing emigration
(b) Prohibiting immigration
(c) Reducing the participation age
10. Which of the following would increase the population of a country:
(a) Reducing death rate
(b) Raising birth rate
(c) Allowing immigration
11. Mobility of labour can be increased by:
(a) provision of education and training
(b) Better and cheaper transport facilities
(c) Diffusion of information
12. Division of labour leads to:
(a) More production
(b) Less production
(c) Decreased efficiency
13. Which one of the following is not an advantage of division of labour:
(a) Increased efficiency (c) Inventions and innovations
(b) Efficient use of machinery (d) All of the above
14. Which one of the following is an example of capital goods:
(a) Machinery (c) Rivers
(b) Mountains (d) All of the above
15. Which one of the following is the reward of capital:
(a) Profit (c) Wage
(b) Interest (d) Rent
Economics
16. Capital can be increased by:
(a) Consumption (c) Financial investment
(b) Real investment (d) All of the above
17. Which one of the following is the reward of the enterepreneur:
(a) Profit (c) Wage
(b) Interest (d) Rent
18. There are ___________ factors of production.
(a) 1 (c) 2
(b) 3 (d) 4
19. ___________ is a fixed factor of production.
(a) Land (c) Labour
(b) Capital (d) Organization.
20. ___________ is variable factor.
(a) Capital (c) Labour
(b) Organization (d) All of them.
21. __________ os a basic factor of production.
(a) Land (c) Labour
22. Organization is the modified form of ___________.
(a) Land (c) Labour
23. Factors of production creates ___________ & __________.
(a) Usefulness & Utility (c) Value & usefulness
(b) Utility & Value (d) All three
24. Land is ___________ factor.
(a) Active (c) Inactive
(b) Both (d) None of them.
25. Shares, bonds, shops are the form of ___________.
(a) Wealth (c) Land
(b) Capital (d) Labour
26. The combination of factors of production is the main function of ___________.
(a) Labour (c) Capital
(b) Organization (d) All three
27. The basic conditions of labour is ___________ and ___________.
(a) Human effort & utility (c) Utility & Wealth
(b) Human effort & Monetary Reward (d) All three
28. In the definition of ___________ all natural resources are included.
(a) Labour (c) Capital
(b) Land (d) Organization.
29. Labour is ___________ factor.
(a) Active (c) Inactive
(b) Static (d) None of them.
30. ___________ are responsible of Profit & Loss.
(a) Debenture holder (c) Shareholder
(b) Both (d) None of them
31. The primary form of business organization is ___________.
(a) Joint Stock company (c) Partnership
(b) Single ownership (d) Cooperative Society
32. The improvement in the real stock of assets is called ___________.
(a) Mobility of Capital (c) Efficiency of Capital
(b) Capital formation (d) All three
33. The Malthas theory of population was introduced in ___________.
(a) 1798 (c) 1799
(b) 1796 (d) 1797
Answer Key
S.# Ans S.# Ans S.# Ans S.# Ans
1. 11. 21. 31.
2. 12. 22. 32.
3. 13. 23. 33.
4. 14. 24.
Economics
5. 15. 25.
6. 16. 26.
7. 17. 27.
8. 18. 28.
9. 19. 29.
10. 20. 30.
Ch. # 7
LAWS OF RETURNS
MCQs
1. Marginal product and averge product curves are:
(a) U-shaped (c) Inverted –U shaped
(b) L –shaped (d) All of the above
2. When marginal product, MP is zero, total product,TP will be:
(a) Increasing (c) Decreasing
(b) Maximum (d) Minimum
3. When TP is maximum MP will be:
(b) Zero (d) All of the above
4. MP Interest AP curve at:
(a) Maximum of AP (c) Minimum of MP
(b) All of the above (d) None of the above
5. When AP is greater than MP the former will be:
(b) Constant (d) Any of the above
6. In stage 1of Propduction. MP remains:
(b) Constant (d) Any of the above
7. In The second stage of production MP:
(a) Decrease (c) Increase
(b) Stays the same (d) Any of the above
8. In the 3rd stage of production.MP is:
b) Zero (d) All of the above
9. When out put increases more than proportionate the increase in the variable input
which law of production applies?
a) Law of increasing return (c) Law of decreasing returns
b) Law of constant return (d) Any of the above
10. When law of constant returns applies, Output increases with?
(a) Constant increments (c) Increasing increments
(b) Decrease Increment (d) All of the above
11. An other name for law of increasing returns is
(a) Law of increasing costs (c) Law of decreasing costs
(b) Law of constant costs (d) All of the above
12. The law of diminishing returns most frequently applies in:
(a) Agriculture (c) Industry
(b) Service sector (d) All of the above
13. The laws of returns to scale have relevance to:
(a) Short- run (c) Long run
(b) Both short –run and long-run (d) Neither short – run nor long – run
14. In the long – run how many factors of production are held constant:
(a) One (c) Two
(b) Zero (d) Any of the above
15. The law of increasing returns to scale applies due to:
(a) Economics (c) Diseconomics
16. If a firm doubles the amount of all inputs and experiences a less than double
increase in output, it means firms is facing;
(a) Economics of scale (c) Dis economies of scale
(b) Diminishing marginal returns (d) Both B and C
Economics
17. Laws of Returns relates with _________.
(a) Revenue (c) Income
(b) Production (d) None of them.
18. Laws of Returns is combination of _________ laws.
(a) 1 (c) 2
(b) 3 (d) 4
19. Increasing Returns is also called __________ cost.
(a) Increasing (c) decreasing
(b) Constant (d) All three
20. Increasing Returns are effective on __________ sector.
(a) Industry (c) Agriculture
(b) Poultry farming (d) Nothing
21. Under Increasing returns Marginal production __________ .
(a) Increases (c) Decreases
(b) Constant (b) Nothing.
22. Labour & Capital are __________ Factors.
(a) Fixed (c) Variable
(b) Inelastic (d) Nothing
23. Under increasing returns total production increases with __________ rate.
(a) Constant (c) Increasing
(b) decreasing (d) None of them
24. The optimum relation between fixed & variable factors shows law of ______ Return.
(b) decreasing (d) All three
25. Constant returns is also called _________ cost.
(b) decreasing (d) All three
26. The last stage of laws of Returns is law of _________ Return.
(b) decreasing (d) None of them
27. Law of diminishing returns is effect on ___________ sector.
(a) Agriculture (c) Poultry farming
(b) Dairy farming (d) All three
28. In agriculture there is dominancy of ___________ factor.
(a) Artificial (c) Natural
(b) Both (b) None of them
29. Diminishing returns is also called ___________ cost.
(b) Constant (d) Laws
30. Under decreasing returns ___________ production increases with decreasing rate.
(a) Marginal (c) Average
(b) Total (d) None of them.
31. Under decreasing returns Marginal Production is ___________ slope shape.
(b) Horizontal (d) Vertical
32. Under constant returns Marginal production is ___________ shape.
(a) Positive slope (c) Horizontal
(b) Vertical (d) Negative
33. Under increasing returns marginal production is ___________ slope shape.
(a) Negative (c) Positive
(b) Horizontal (d) Vertical
34. Enjoyment of abnormal profit by few firms is called ___________ economies.
(a) Internal (c) External
35. If the whole industry enjoys abnormal profit it is called ___________ economies.
36. Jang and Dawn are enjoying ___________ economies.
(b) Both of them (d) None of them
37. In Pakistan Textile Industry is enjoying ___________ economies.
(b) None of them (d) Both of them
Economics
38. The scale of production depends upon __________.
(a) Finance (c) Market Size
(b) Modern Technique (d) All of them
39. Which one of the following statements is true?
(a) If the marginal cost is greater than the average cost the average cost falls
(b) If the marginal cost is greater than the average cost the average cost increases
(c) If the marginal cost is positive total costs are maximized
(d) If the marginal cost is negative total costs increase at a decreasing rate if output
increases
40. According to the law of diminishing returns:
(a) The marginal product eventually falls as more units of a variable factor are added to
a fixed factor
(b) Marginal utility falls as more units of a product are consumed
(c) The total product falls as more units of a variable factor are added to a fixed factor
(d) The marginal product eventually increases as more units of a variable factor are
added to a fixed factor
41. The law of diminishing returns assumes:
(a) There are no fixed factors of production
(b) There are no variable factors of production
(c) Utility is maximized when marginal product falls
(d) Some factors of production are fixed
42. When internal economies of scale occur:
(a) Total costs fall (c) Marginal costs increase
(b) Average costs fall (d) Revenue falls
43. The first level of output at which the long run average costs are minimized is called:
(a) The Minimum Efficient Scale (c) The Minimum External Scale
(b) The Maximum External Scale (d) The Maximum Effective Scale
44. The average variable cost curve:
(a) Is derived from the average fixed costs
(b) Converges with the average cost as output increases
(c) Equals the total costs divided by the output
(d) Equals revenue minus profits
45. If marginal cost is positive and falling:
(a) Total cost is falling
(b) Total cost is increasing at a falling rate
(c) Total cost is falling at a falling rate
(d) Total cost is increasing at an increasing rate
46. Total increases from Rs. 500 to Rs. 600 when output increases from 20 to 30 units. Fixed
costs are Rs. 200. Which of the following is true?
(a) Marginal cost is Rs. 20 (c) Average cost falls
(b) Variable cost rises by Rs. 100 (d) Average fixed cost is Rs. 100
47. Total increases from Rs. 500 to Rs. 600 when output increases from 20 to 30 units. Fixed
costs are Rs. 200. Which of the following is true?
(a) Marginal cost is Rs. 20 (c) Average cost rises
(b) Variable cost rises by Rs. 200 (d) Fixed costs rise
48. If marginal product is below average product:
(a) The total product will fall
(b) The average product will fall
(c) Average variable costs will fall
(d) Total revenue will fall
Answer Key
1. 11. 21. 31. 41.
2. 12. 22. 32. 42.
3. 13. 23. 33. 43.
4. 14. 24. 34. 44.
5. 15. 25. 35. 45.
6. 16. 26. 36. 46.
7. 17. 27. 37. 47.
Economics
8. 18. 28. 38. 48.
9. 19. 29. 39.
10. 20. 30. 40.
Ch. # 8
COST AND REVENUE ANALYSIS
MCQs
1. The allocation of scare resources involves:
(a) Fixed cost (c) Variable cost
(b) Opportunity cost (d) All of the above
2. Total fixed cost:
(a) Increase with the level of output
(b) Decrease with the level of output
(c) Remains constant at all levels of output
3. Total variable cost:
(a) Increase with the level of output (c) Decrease with the level of output
(b) Remains constant at all of output (d) All of the above
4. Total cost is:
(a) Sum of total fixed and total variable costs
(b) Sum of AVC and AFC
(c) Sum of ATC and MC
5. AVC varies with the level of output in that:
(a) It first increases then stars decreasing (c) It first decreases then stars increasing
(b) It ever increases (d) It ever decrease
6. Average total cost is:
(a) sum of AFC and AVC (c) Total cost divided the level of output
7. The Tc curve is:
(a) S-shaped (c) Inverted S-shaped
(b) J-shaped (d) All of the above
8. TC Curve in the short –run:
(a) Intersect the vertical axis (c) Intersect the horizontal axis
(b) Passes through the orign (d) Any of the above
9. Which one of the following cost curves is not U-shaped:
(a) MC (c) AVC curve
(b) AFC curve (d) ATC curve
10. Total revenue is the product of ________.
(a) Price & Income (c) Cost & Revenue
(b) Price & Quantity (d) All of them.
11. Average revenue always equals to ________.
(a) Total revenue (c) Income
(b) Price (d) None of them
12. Average Revenue is the ratio between ________.
(a) Price & Income (c) Total revenue & Quantity
(b) Income & Cost (d) None of them
13. The change in total revenue is called ________.
(a) Average (c) Total
(b) Marginal (d) All of them
14. In perfect competition Average and Marginal revenue curves have ________ shape.
(a) Horizontal (c) Vertical
(b) Negative slope (d) All of them.
15. In Monopoly Average & Marginal revenue curves are ________ shape.
(a) Horizontal (c) Negative slope
(b) Vertical (d) Positive slope.
16. Rent of land is ________ cost.
Economics
17. Advertisement is ________ cost,
18. If producer is using his own factors then he pays __________ cost.
(a) Explicit (c) Implicit
(b) Fixed (d) Variable
19. If producer is using the hired factor of production then he pays __________ cost.
(a) Explicit (c) Implicit
(b) Fixed (d) Variable
20. Average fixed cost curve has ___________ shape.
(a) Positive slope (c) Negative slope
(b) U-Shape (d) Horizontal.
21. Short Run total cost is the sum of ___________ and ___________ cost.
(a) Fix & Variable (c) Average fix & Average variable
(b) Fix & Average variable (d) None of them.
22. Short run total cost depends upon ___________ cost.
(a) Total Fix (c) Total variable
(b) Marginal (d) All three
23. Average variable cost is ___________ shape.
(a) “U” (c) Horizontal
(b) Vertical (d) Positive slope
Answer Key
1. 6. 11. 16. 21.
2. 7. 12. 17. 22.
3. 8. 13. 18. 23.
4. 9. 14. 19.
5. 10. 15. 20.
Ch. # 9
MARKET
MCQs
1. Under perfect competition:
(a) There is a large number of buyers and sellers
(b) Product is homogeneous
(c) There is perfect knowledge
2. Under perfect competition a firm is:
(a) Price taker (c) Price maker
(b) Price taker or price maker (d) All of the above
3. In perfect competition a firm’s MR is:
(a) Greater than AR (c) Less than AR
(b) Equal to AR (d) Any of the above
4. A perfectly competitive firm’s MR and AR curves:
(a) Slope positively (c) Slope negatively
(b) Are parallel to output axis (d) Are any of the above
5. A competitive firm’s TR curve increases:
(a) At an increasing rate (c) Increases at a decreasing rate
(b) Increases at a fixed rate (d) Any of the above
6. A firm is said to be in equilibrium when:
(a) It maximizes its total profit (c) It suffers from minimum loss
(b) Any of the above (d) None of the above.
7. A perfectly competitive firm’s equilibrium occurs at a point where:
(a) MC interest MR from above (c) MC interest MR from below
(b) MC is above the MR (d) MC is below the MR
Economics
8. A competitive firm’s short – run equilibrium is characterized by:
(a) Earning of a abnormal profit (c) Earning of normal profit
(b) Suffering from normal loss (d) Facing a break – even situation
9. A competitive firm’s break – even point occurs where:
(a) Price is equal to ATC
(b) Price is equal to AFC
(c) Price is greater than AVC but less than ATC
(d) Any of the above holds
10. Under perfect competition, if most of the firms in an industry are making super normal
profit then new firms will enter the industry:
(a) In the short-run
(b) In the long-run
(c) Neither in the short – run nor in the long – run
11. A perfectly competitive firm in the long – run will ;
(a) Earn abnormal profit (c) Earn only normal profit
(b) Suffer from losses (d) Any of the above
12. A perfectly competitive firm’s long-run equilibrium is characterized
by which of the following:
(a) LMC = MR (c) LAC = AR
(b) LMC = LAC (d) MR = AR
13. An industry will be in the long – run equilibrium when:
(a) New firms have inducement to enter the industry
(b) Old firms want to quit the industry
(c) All the firms in the industry make just normal profit
14. Under perfect competition an industry’s long-run supply curve is:
(b) Parallel to output axis (d) Any of the above
15. Under perfect competition. A firm is price taker because:
(a) Each firm produces a very small fraction of industry output.
(b) Of free entry and exit
(c) The product is homogeneous
16. In the short-run a firm will close down the plant if:
(a) Price falls below the minimum of AC
(b) Price falls below the minimum of MC
(c) Prices is below AC but above minimum of AVC
(d) Any of the above holds
17. A monopolist firm’s demand curve is:
(b) Parallel to output axis (d) Any of the above
18. A monopolist firm’s AR curve:
(a) Lies above the MR curve (c) Lies below the MR curve
(b) Overlaps the MR curve (d) All of the above
19. A monopolist ‘s equilibrium always occurs at:
(a) The midpoint of the demand curve
(b) A point above the midpoint of the demand curve
(c) A point below the midpoint of the demand curve
20. In the short run a monopolist:
(a) Earns abnormal profit (c) Earns normal profit
(b) Suffers from losses (d) Any of the above
21. In perfect competition the products are ___________.
(a) Homogeneous (c) Equal
(b) Same (d) All of them.
22. In ___________ there is only a single producer .
(a) Perfect competition (c) Imperfect competition
(b) Monopoly (d) None of them
23. Imperfect competition is the form of ___________.
(a) Perfect competition & Monopoly (c) Imperfect competition
(b) Monopoly (d) All three
Economics
24. Pakistan Railways is enjoying ___________ in Pakistan.
(a) Perfect competition (c) Imperfect competition
(b) Monopoly (d) All three
25. Automobile Industry is the example of ___________ market.
(a) Monopoly (c) Imperfect competition
(b) Perfect competition (d) None of them
26. In perfect competition the demand is ___________.
a. Elastic (c) Inelastic
(b) Perfect elastic (d) Imperfect inelastic
27. Monopoly demand is ___________.
a. Elastic (c) Inelastic
(b) Perfect elastic (d) Perfect inelastic
28. In perfect competition demand is ___________.
a. Highly inelastic (c) Perfect inelastic
(b) Highly elastic (d) None of them
29. Marginal cost curve is ___________ shape.
a. Horizontal (c) Vertical
b. Negative slope (d) Positive slope
30. The decreasing and increasing rate of Marginal cost is ___________ then average cost.
a. Slow (c) Fast
b. Both (d) None of them
31. If the marginal revenue is less than the marginal cost then to profit maximize a firm
should:
(a) Reduce output (c) Increase output
(b) Leave output where it is (d) Increase costs
32. If the price is less than the average costs but higher than the average variable costs:
(a) The firm is making a loss and will shutdown in the short term
(b) The firm is making a profit
(c) The firm is making a loss but will continue to produce in the short term
(d) The firm is making a loss and is making a negative contribution to fixed costs
33. If firms earn normal profits:
(a) They will aim to leave the industry
(b) Other firms will join the industry
(c) The total revenue equals total costs
(d) No profit is made in accounting terms
34. In the long term a firm will produce provided the revenue covers:
(a) Fixed costs (c) Variable costs
(b) Total costs (d) Sales
35. In the short term a firm will produce provided the revenue:
(a) Covers fixed costs (c) Covers variable costs
(b) Covers total costs (d) Covers sales
36. The profit per sale is a measure of:
(a) Cash flow (c) Profitability
(b) Feasibility (d) Liquidity
37. The total costs are Rs. 200 and 10 units are produced) The marginal cost of an 11 th unit
is Rs. 130. Which of the following is true?
(a) The average cost increases from Rs. 20 to Rs. 30
(b) The total costs for 11 units are Rs. 70
(c) The average cost for 10 units is Rs. 130
(d) The average cost for 11 units is Rs. 130
38. Total revenue equals:
(a) Price plus the quantity
(b) Price multiplied by the quantity sold
(c) Price divided by the quantity sold
(d) Price minus the quantity sold
39. If marginal revenue equals marginal cost:
(a) No profit is being made
(b) Total revenue equals total cost
(c) Profits are maximized
(d) Producing another unit would increase profits
40. Price equals:
(a) Total revenue – quantity (c) Total revenue / quantity sold
(b) Total quantity sold * quantity sold (d) Total revenue / total cost
Economics
41. Firms in perfect competition face a:
(a) Perfectly elastic demand curve (c) Perfectly inelastic demand curve
(b) Perfectly elastic supply curve (d) Perfectly inelastic supply curve
42. In perfect competition:
(a) The price equals the marginal revenue
(b) The price equals the average variable cost
(c) The fixed cost equals the variable costs
(d) The price equals the total costs
43. A profit maximizing firm in perfect competition produces where:
(a) Total revenue is maximized
(b) Marginal revenue equals zero
(c) Marginal revenue equals marginal cost
(d) Marginal revenue equals average cost
(a) The products firms offer are very similar
(b) Products are heavily differentiated
(c) A few firms dominate the market
(d) Consumers have limited information
45. In the long run in perfect competition:
(a) The price equals the total revenue (c) Firms are allocatively inefficient
(b) Firms are productively efficient (d) The price equals total cost
(a) Short run abnormal profits are competed away by firms leaving the industry
(b) Short run abnormal profits are competed away by firms entering the industry
(c) Short run abnormal profits are competed away by the government
(d) Short run abnormal profits are competed away by greater advertising
(a) A few firms dominate the industry (c) Firms are price makers
(b) There are many buyers but few sellers (d) There are many buyers and sellers
48. In the short run firms in perfect competition will still produce provided:
(a) The price covers average variable cost (c) The price covers variable cost
(b) The price covers average fixed cost (d) The price covers fixed costs
49. In the long run equilibrium in perfect competition:
(a) Price = average cost = marginal cost (c) Price = average cost = total cost
(b) Price = marginal revenue = total cost (d) Total revenue = total variable cost
50. For a perfectly competitive firm:
(a) Total revenue is a straight line
(b) Price is greater than marginal revenue
(c) Price equals total revenue
(d) Price equals total cost
51. X inefficiency occurs when:
(a) The price is greater than the marginal cost
(b) The price is greater than the average cost
(c) Costs are higher than they could be due to a lack of competitive pressure
(d) There are external costs
52. The marginal revenue curve in monopoly:
(a) Equals the demand curve
(b) Is parallel with the demand curve
(b) Lies below and converges with the demand curve
(d) Lies below and diverges from the demand curve
53. In monopoly when abnormal profits are made:
(a) The price set is greater than the average cost
(b) The price is less than the marginalcost
(c) The average revenue equals the marginal cost
(d) Revenue equals total cost
54. In monopoly in long run equilibrium:
(a) The firm is productively efficient
(b) The firm is allocatively inefficient
(c) The firm produces where marginal cost is less than marginal revenue
(d) The firm produces at the socially optimal level
55. A monopolist faces
(a) An upward sloping demand curve
(b) A perfectly elastic demand curve
Economics
(c) A downward sloping demand curve
(d) A demand curve with a positive price elasticity of demand
56. In a monopoly which of the following is not true?
(a) Products are differentiated
(b) There is freedom of entry and exit into the industry in the long run
(c) The firm is a price maker
(d) There is one main seller
57. In monopoly which of the following is true?
(a) There are many buyers and sellers
(b) There is one main buyer
(c) There is one main seller
(d) The actions of one firm do not affect the market price and quantity
58. According to Schumpeter:
(a) Monopolies are inefficient
(b) Monopoly profits act as an incentive for innovation
(c) Monopolies are allocatively efficient
(d) Monopolies are productively efficient
59. A welfare loss occurs in monopoly where:
(a) The price is greater than the marginal cost
(b) The price is greater than the marginal benefit
(c) The price is greater than the average revenue
(d) The price is greater than the marginal revenue
60. In the UK the Competition Commission
(a) Bans monopolies
(b) Fines all monopolies
(c) Prevents firms acquiring more than 25% of the market
(d) Has the right to investigate monopolies and will assess each one on its own merits
61. If a few firms dominate an industry the market is known as:
(a) Monopolistic competition (c) Competitively monopolistic
(b) Duopoly (d) Oligopoly
62. In a cartel member firms may be given a fixed amount to produce. This amount is called
a:
(a) Limit (c) Factor
(b) Quota (d) Quotient
63. In the Kinked Demand Curve theory it is assumed that:
(a) An increase in price by the firm is not followed by others
(b) An increase in price by the firm is followed by others
(c) A decrease in price by the firm is not followed by others
(d) Firms collude to fix the price
64. The Kinked Demand Curve theory assumes:
(a) Firms cooperate
(b) Firms act as part of a cartel
(c) Firms are competitive with each other
(d) Firms are not profit maximizers
65. In Game Theory:
(a) Firms are always assumed to act independently
(b) Firms are always assumed to cooperate with each other
(c) Firms always collude as part of a cartel
(d) Firms consider the actions of others before deciding what to do
66. In the Kinked Demand Curve theory:
(a) The marginal revenue curve is perfectly horizontal
(b) Demand is always price inelastic
(c) Demand is always price elastic
(d) Non price competition is likely
67. In oligopoly
(a) The largest four firms are likely to have a small market share
(b) The price is likely to equal marginal revenue
(c) Firms will continue to produce in the long run if price is less than average cost
(d) Firms may collude or compete depending on their assumptions about their
competitors
68. A model of Game Theory of oligopoly is known as the:
(a) Prisoner's Dilemma (c) Monopoly Cell
(b) Jailhouse Sentence (d) Jury Box
Economics
69. In cartels:
(a) Each individual firm profit maximizes
(b) There may be an incentive to cheat
(c) The industry as a whole is loss making
(d) There is no need to police agreements
70. In a cartel:
(a) Firms compete against each other
(b) Price wars are common
(c) Firms use price to win market share from competitors
(d) Firms collude
71. In monopolistic competition:
(a) Firms face a perfectly elastic demand curve
(b) All products are homogeneous
(c) Firms make normal profits in the long run
(d) There are barriers to entry to prevent entry
(a) Demand is perfectly elastic
(b) Products are homogeneous
(c) Marginal revenue = price
(d) The marginal revenue is below the demand curve and diverges
73. In monopolistic competition firms profit maximize where:
(a) Marginal revenue = Average revenue
(b) Marginal revenue = Marginal cost
(c) Marginal revenue = Average cost
(d) Marginal revenue = Total cost
74. Which of the following is not one of the four Ps in marketing?
(a) Product (c) Price
(b) Place (d) Presence
75. Effective branding will tend to make:
(a) Demand more price inelastic
(b) Supply more price inelastic
(c) Demand more income elastic
(d) Supply more income elastic
76. In monopolistic competition if firms are making abnormal profit other firms will enter and:
(a) The marginal cost will shift outwards
(b) The demand curve will shift inwards
(c) The average cost will shift downwards
(d) The average variable cost will increase
77. In Porter's five forces model conditions are more favourable for firms within an industry if:
(a) Buyer power is high
(b) Supplier power is high
(c) Entry threat is low
(d) Substitute threat is high
78. If a firm takes over a competitor then, according to Porter's 5 forces model:
(a) Buyer power is higher (c) Supplier power is higher
(b) Substitute threat is higher (d) Rivalry is lower
79. In marketing "USP" stands for:
(a) Unique Selling Proposition (c) Underlying Sales Pitch
(b) Unit Sales Point (d) Under Sales Procedure
(a) There are few sellers (c) There are few buyers
(b) There is one seller (d) There are many sellers
81. Barriers to entry:
(a) Do exist in monopoly (c) Cannot exist in oligopoly
(b) Doexist in monopolistic competition (d) Do not exist in perfect competition
82. Which best describes price discrimination?
(a) Charging different prices for different products
(b) Charging the same prices for different products
(c) Charging the same prices for the same products
(d) Charging different prices for the same products
83. For a firm operating in two markets and price discriminating when profit maximizing
(a) Marginal revenue in A = Price B
(b) Marginal revenue in A = Price A
Economics
(c) Marginal revenue in A = Marginal revenue B
(d) Marginal revenue in A = Average cost in A
84. If the price elasticity of demand for a product in market A is -0.2 and in market B is -3 a
price discriminator will charge:
(a) The higher price in market A
(b) The higher price in market B
(c) The same price in both markets
(d) Cannot tell which price will be higher
85. In perfect price discrimination:
(a) Consumer surplus is maximized
(b) Produce surplus is zero
(c) Community surplus is maximized
(d) Consumer surplus is zero
86. A benefit to consumers of price discrimination is that:
(a) Some products are produced that would not otherwise be produced
(b) Producer surplus increases
(c) Consumer surplus decreases
(d) Firms' profits increase
87. In perfect price discrimination:
(a) The demand curve is the marginal cost curve
(b) The average revenue equals the average cost
(c) The marginal cost is the average cost curve
(d) The demand curve is the marginal revenue
88. When price discriminating abnormal profits are made if:
(a) Average revenue is greater than average variable cost
(b) Average revenue is greater than average cost
(c) Average revenue is greater than marginal revenue
(d) Average revenue is greater than average fixed cost
89. Barriers to entry:
(a) Enable abnormal profits to be made in the long run
(b) Enable losses to be made in the long run
(c) Enable abnormal profits to be made in the short run only
(d) Occur in perfect competition
90. Barriers to entry do not include
(a) Patents held by established firms
(b) Internal economies of scale experienced by established firms
(c) High mobility of resources
(d) High investment costs to enter an industry
91. To maximize sales revenue a firm should produce where:
(a) Marginal cost is zero
(b) Marginal revenue is maximized
(c) Marginal revenue is zero
(d) Marginal revenue equals marginal cost
92. To maximize growth without making a loss a firm should produce the highest output
where:
(a) Average revenue equals marginal cost
(b) Average revenue equals average cost
(c) Marginal revenue equals marginal cost
(d) Average cost equals marginal cost
93. If one car company takes over another car company this is an example of which type of
integration?
(a) Vertical (c) Horizontal
(b) Conglomerate (d) Literal
94. If a car company takes over a clothes business this is an example of which type of
integration?
(a) Vertical (c) Horizontal
(b) Conglomerate (d) Literal
95. Acquisition and merger are examples of:
(a) Internal growth (c) External growth
(b) Organic growth (d) Underlying growth
96. If firms join together to set prices and quantities this is known as what?
(a) Interaction (c) Conglomerate
(b) Collusion (d) Integration
Economics
97. In the Ansoff matrix a strategy focusing on new products and new markets is known as:
(a) New product development (c) Diversification
(b) Market development (d) Market penetration
98. Satisficing occurs when
(a) Profits are maximized
(b) Profit are minimized
(c) A business meets the different needs of stakeholders and makes a satisfactory level
of profits
(d) Only normal profits are made
99. If a business becomes too big through mergers and takeovers it can experience cost
problems due to
(a) Economies of scale (c) Diseconomies of scale
(b) The minimum efficient of scale (d) Synergy
100. An example of backward vertical integration is:
(a) A supermarket buying a farm
(b) A supermarket buying another supermarket
(c) A supermarket buying an insurance company
(d) A supermarket buying a car rental business
101. An increase in the wage rate:
(a) Will usually lead to more people employed
(b) Will decrease total earnings if the demand for labour is wage elastic
(c) Is illegal in a free market
(d) Will cause a shift in the demand for labour
102. The Marginal Revenue Product is likely to be wage inelastic if:
(a) Labour costs are a high percentage of total costs
(b) Demand for the final product is price inelastic
(c) It is relatively easy to substitute capital for labour
(d) There are many substitutes for the final product
103. A fall in demand for labour is likely to lead to:
(a) A lower equilibrium wage and lower quantity of labour employed
(b) A lower equilibrium wage and higher quantity of labour employed
(c) A higher equilibrium wage and higher quantity of labour employed
(d) A higher equilibrium wage and lower quantity of labour employed
104. A decrease in the supply of labour is likely to lead to:
(a) A lower equilibrium wage and lower quantity of labour employed
(b) A lower equilibrium wage and higher quantity of labour employed
(c) A higher equilibrium wage and higher quantity of labour employed
(d) A higher equilibrium wage and lower quantity of labour employed
105. The Marginal Revenue Product is:
(a) Upward sloping due to the law of demand
(b) Upward sloping due to the law of marginal utility
(c) Downward sloping due to the law of diminishing returns
(d) Downward sloping due to the law of supply
106. A monopsony occurs if there is:
(a) A major employer of labour (c) A highly unionised workforce
(b) A major provider of employees (d) A single seller in a market
107. A profit maximizing firm will employ labour up to the point where:
(a) Marginal revenue = marginal product
(b) Marginal cost = marginal product
(c) Marginal revenue product = average cost of labour
(d) Marginal revenue product = marginal cost of labour
108. In a perfectly competitive labour market firms are wage takers and the marginal cost of
labour equals:
(a) The average cost of labour
(b) The marginal product
(c) The marginal revenue
(d) The total cost of labour
109. If employees cannot accept a job because of the costs of moving this is known as:
(a) Occupational immobility
(b) Cyclical unemployment
(c) Structural immobility
(d) Geographical immobility
Economics
110. If the minimum wage is set above the equilibrium wage rate, then other things
unchanged:
(a) There will be equilibrium in the labour market
(b) There will excess demand in the labour market
(c) There will be excess supply in the labour market
(d) More people will be employed
Answer Key
1. 26. 51. 76. 101.
2. 27. 52. 77. 102.
3. 28. 53. 78. 103.
4. 29. 54. 79. 104.
5. 30. 55. 80. 105.
6. 31. 56. 81. 106.
7. 32. 57. 82. 107.
8. 33. 58. 83. 108.
9. 34. 59. 84. 109.
10. 35. 60. 85. 110.
11. 36. 61. 86.
12. 37. 62. 87.
13. 38. 63. 88.
14. 39. 64. 89.
15. 40. 65. 90.
16. 41. 66. 91.
17. 42. 67. 92.
18. 43. 68. 93.
19. 44. 69. 94.
20. 45. 70. 95.
21. 46. 71. 96.
22. 47. 72. 97.
23. 48. 73. 98.
24. 49. 74. 99.
25. 50. 75. 100.
Economics
(Macro Economics)
Ch. # 10
NATIONAL INCOME
MCQs
1. Which one of the following will not be included in Gross National Product?
(a) Services of a maiden servant (c) Services of a home maker
(b) Private consumption expenses (d) Investment expenditure
2. All are included in Grass National Product except one. Which one?
(a) Government Transfers Payment (c) Exports
(b) Expenditure on investment (d) Private consumption expenditure
3. Aggregate of unsold goods are:
(a) * Investment in GNP
(b) Included in GNP but not as consumption and investment
(c) Included in GNP provided they are durable
(d) Not included in GNP
4. Difference between Personal Income and Disposable Personal Income in the following is:
(a) Personal income tax (c) Depreciation
(c) Saving (d) Corporate Profit
5. If you hire the services of a gardener for lawn cutting instead of self then:
(a) GDP does not change
(b) GDP increases so long gardener tell about his income
(c) GDP falls
(d) Impossible to know the effect on GDP
6. Private Saving is:
(a) Net foreign saving (c) Government Saving
(b) Business and net foreign saving (d) Private and government saving
7. Which one of the following item would be the part of investment at the time of
computing national and product?
(a) Social Security benefits (c) A new post office
(b) A new apartment building (d) Both a and b
8. Gross Domestic Product is equal to Gross Domestic Income if:
(a) Supply is equal to demand (c) No government is there
(b) Depreciation is neglected (d) Always
9. Whatever value added by the firm is equal to:
(a) Total output
(b) Total output minus rewards paid to the factors
(c) Total output minus payments to intermediary goods
(d) Labor employed
10. The dominant part in GNP is:
(a) Compensation paid to the workers (c) Income of the owner
(b) Indirect Taxes (d) Depreciation ______________
11. Which of the following is a macroeconomic issue?
(a) The price of houses in Oxford (c) The wage rate for plumbers in London
(b) Your decision to work or stay at home (d) The level of unemployment in the UK
12. What is meant by an objective?
(a) A policy (c) A way of reaching a target
(b) A target (d) A strategy
13. Which of the following is not involved with fiscal policy?
(a) Income tax (c) National insurance
(b) VAT (d) Interest rates
14. Which does the government not control directly?
(a) Spending on health (c) Spending on defence
(b) Firms' investment decisions (d) Spending on education
15. Which of the following is not a macroeconomic issue?
(a) Unemployment (c) Inflation
(b) The wages paid to footballers (d) Economic growth
16. Which of the following can the government not use directly to control the economy?
(a) Pay rates within the private sector
(b) Pay rates in the public sector
(c) Investment in education
(d) Benefits available for the unemployed and sick
Economics
17. Which of the following is a policy instrument as opposed to a government objective?
(a) Lower interest rates (c) A bettertrade position
(b) Faster economic growth (d) Lower unemployment
18. Which of the following is a possible government objective as opposed to a policy?
(a) Lower interest rates (c) Lower taxation rates
(b) Lower government spending (d) Lower inflation
19. Which of the following is not likely to be a government objective?
(a) Increasing employment (c) Increasing economic growth
(b) Increasing government spending (d) Increasing the level of exports
20. "Reducing inflation is a more important objective than economic growth" is an example
of:
(a) Normative economics (c) Positive economics
(b) Objective economics (d) Reality economics
21. Injections:
(a) Decrease aggregate demand
(b) Always equal savings
(c) Always equal national income
(d) Include investment and export spending
22. An increase in national income is:
(a) Likely to increase exports
(b) Likely to decrease savings
(c) Likely to decrease investment
(d) Likely to increase spending on imports
23. An increase in national income is likely to:
(a) Decrease tax receipts
(b) Worsen the trade position
(c) Automatically cause an increase in government spending
(d) Cause an increase in injections into the economy
24. A significant increase in the government budget deficit is likely to:
(a) Reduce injections into the economy
(b) Reduce national income
(c) Move the economy away from full employment
(d) Boost aggregate demand
25. If injections are greater than withdrawals:
(a) National income will increase
(b) National income will decrease
(c) National income will stay in equilibrium
(d) Prices will fall
26. Injections:
(a) Are assumed to be exogeneous (independent of national income)
(b) Are assumed to be a function of national income
(c) Decrease aggregate demand
(d) Decrease the investment into an economy
27. For equilibrium in an open four sector economy:
(a) Actual injections = actual withdrawals
(b) Planned injections = planned withdrawals
(c) Savings = investment
(d) Government spending = tax revenue
28. A reflationary policy could include:
(a) decreasing injections (c) increasing taxation rates
(b) increasing interest rates (d) increasing government spending
29. A reflationary (expansionist) policy:
(a) Increases aggregate supply (c) Increases aggregate demand
(b) Decreases the price level (d) Increases full employment
30. Which of the following is an injection into the economy?
(a) Investment (c) Savings
(b) Taxation (d) Import spending
31. Gross National Product equals:
(a) Net National Product adjusted for inflation
(b) Gross Domestic Product adjusted for inflation
(c) Gross Domestic Product plus net property income from abroad
(d) Net National Product plus net property income from abroad
Economics
32. Net National Product equals:
(a) Gross National Product adjusted for inflation
(b) Gross Domestic Product adjusted for inflation
(c) Gross Domestic Product plus net property income from abroad
(d) Gross National Product minus depreciation
33. The standard of living is often measured by:
(a) Real GDP per capita (c) Real GDP
(b) Real GDP * population (d) Real GDP plus depreciation
34. In a recession:
(a) Unemployment is likely to be low (c) Prices are likely to increase
(b) Growth is negative (d) Growth is slow
35. In a boom:
(a) Surpluses are likely to occur
(b) Prices are likely to fall
(c) Supply will increase immediately to match demand
(d) Shortages may occur
36. GDP is likely to increase with:
(a) An increase in consumer spending (c) An increase in taxation rates
(b) A decrease in government spending (d) A fall in investment
37. To adjust GDP from market prices to factor cost:
(a) Add indirect taxes
(b) Subtract subsidies
(c) Deduct indirect taxes and deduct subsidies
(d) Deduct indirect taxes and add subsidies
38. To adjust from Gross National Product to Net National Product:
(a) Deduct depreciation (c) Deduct indirect taxes
(b) Deduct subsidies (d) Add inflation
39. The Gini coefficient measures
(a) Income inequality (c) Inflation
(b) Unemployment (d) Economic growth
40. A higher GDP per capita may not mean that the quality of life has really improved
because:
(a) It measures wealth not income
(b) It measures Gross Domestic Product
(c) It does not measure the quality of the items produced
(d) It is only measured every five years
41. Economic growth can be measured by:
(a) The CPI (c) The CBI
(b) GDP (d) MPC
42. In a boom:
(a) Unemployment is likely to fall (c) Prices are likely to fall
(b) Demand is likely to fall (d) Imports are likely to fall
43 In a recession, GDP:
(a) Grows negatively (c) Grows slowly
(b) Grows by 0% (d) Grows rapidly
44. The economic cycle is measured by
(a) CPT (c) RPI
(b) GDP (d) MEC
45. A government is most likely to use a reflationary policy
(a) In a recession (c) In a boom
(b) When there is fast GDP growth (d) When prices are increasing fast
46. Potential growth measures:
(a) The growth of the fastest economy in the world
(b) The fastest growth an economy has ever achieved
(c) The present rate of growth of an economy
(d) The rate of growth that could be achieved if resources were fully employed
47. Economic growth can be seen by an outward shift of:
(a) The Production Possibility Frontier
(b) The Gross Domestic Barrier
(c) The Marginal Consumption Frontier
(d) The Minimum Efficient Scale
Economics
48. The socially optimal rate of growth is:
(a) Zero
(b) Negative
(c) Where the marginal social benefit = the marginal social cost
(d) Total social costs are minimized
49. To anticipate what the economy is going to do next the government will look at:
(a) Lagging indicators (c) Flashing indicators
(b) Coincidental indicators (d) Leading indicators
50. The output gap is
(a) The difference between this year's and last year's output
(b) The difference between this year's and next year's output
(c) The difference between actual and potential output
(d) The difference between actual and expected outputs
Answer Key
1. 11. 21. 31. 41.
2. 12. 22. 32. 42.
3. 13. 23. 33. 43.
4. 14. 24. 34. 44.
5. 15. 25. 35. 45.
6. 16. 26. 36. 46.
7. 17. 27. 37. 47.
8. 18. 28. 38. 48.
9. 19. 29. 39. 49.
10. 20. 30. 40. 50.
Ch. # 11
MONEY & VALUE OF MONEY
MCQs
1. Which one of the following property is not essential for being money:
(a) It is a unit of accounting (c) It is store of value
(b) Its internal value is standard (d) It is generally acceptable
2. Importance of cash money in total supply of money is:
(a) Less in developed economies but more in developing economies
(b) Less in developing countries
(c) Equal in both developed and developing countries
(d) Less in both the countries
3. Relative value of money deposited in the financial institution in total supply of money is:
(a) Less in developing countries
(b) More in developing economies
(c) Less in developed economies
(d) Same in both developing and developed countries
4. Basic function of monkey is to work as:
(a) Medium of exchange (c) Provision of liquidity
(b) Base for credit creation (d) Nothing of these
5. The following are included in the definition of money:
(a) Only currency and coins
(b) Currency and demand deposits
(c) Currency, demand deposits and other financial assets
(d) Currency and foreign exchange reserves
6. Bills of Exchange some times are called:
(a) Receivable claims
(b) Business liabilities
(c) Transferable assets
(d) Transfer money __________
Economics
7. Post Office Saving Bank Accounts are the part of:
(a) Money supply (c) Liquid Assets of economy
(b) Elaborated definition of money (d) No one these
8. Equities are:
(a) Transferable (c) Money
(b) Liquid Assets (d) No one
9. Which of the following is the essential characteristic of money?
(a) Bonds (c) Shares
(b) Money (d) Machines
10. According to Grasham's Law:
(a) A good money throws out a good money from circulation
(b) A bad money throws out a bad money from circulation
(c) Paper Money should be convertible for keeping its value stable
(d) Value of money changes opposite to price
11. Large part of supply of money consists on:
(a) Currency notes and coins
(b) Notes, coins and demand deposits
(c) Notes, coins and time deposits
(d) Notes, coins, demand deposits and time deposits
12. Token coins refers to:
(a) Whose face value is more than their intrinsic value
(b) The coins issued as the token of deposited amount
(c) The coins issued for deposited standard coins
(d) The coins which are issued by the authority merely as money
13. Money its as
(a) Medium of exchange (c) Store of Value
(b) Standard of value (d) All of them
14. Cheque is a form of __________Money.
(a) Metallic (c) Paper
(b) Credit (d) All of them
15. Quantity of money is _________ related with price.
(a) Directly (c) Inversely
16. The face and real value of ________ money is save
(a) Standard (c) Token
(b) Paper (d) All of the
17. The face and retail value of _________money is not.
(a) Standard (c) Token
(b) Paper (d) None of them
18. Cheque and credit card is _________ money.
(a) legal (c) Illegal
(b) Metallic (d) All of them
19. Paper money is_________.
(a) Non durable (c) Elastic
(b) Economical (d) All of them
20. In Barker system ____________ are used)
(a) Money (c) Paper
(b) Exchange of goods (d) None of them
21. Quantity theory of money is introduced by Prof.____________
(a) Keens (c) Marshal
(b) Fisher (d) None of them
22. ____________ is meant purchasing power of money.
(a) Theory of International Trade. (c) Kens Theory of full employment
(b) Quantity theory of Money. (d) None of them
23. _________ is meant purchasing power of money.
(a) Functions of money (c) Value of money
(b) Types of money (d) All of them
24. Metallic money is ___________.
(a) Non durable (c) Elastic
(b) Economical (d) None of them
25. Inflation means persistent__________.
(a) Fall in price (c) Rise in price
(b) Stability in price (d) All of them
Economics
26 Deflation means persistent_________.
(a) Rise means price (c) Fall in price
(b) Stability in price (d) All of them
27. Inflation moles_________
(a) Rise m price (c) Law purchasing power
(b) Poor becomes poor (d) All of them
28. The precautionary demand for money is:
(a) An idle balance (c) An active balance
(b) Directly related to interest rates (d) Inversely related to income
29. The liquidity trap occurs when the demand for money:
(a) Is perfectly interest elastic
(b) Is perfectly interest inelastic
(c) Means that an increase in money supply leads to a fall in the interest rate
(d) Means that an increase in the money supply leads to an increase in the interest rate
30. A fall in interest rates is likely to:
(a) Increase aggregate demand (c) Increase savings
(b) Decrease consumption (d) Decrease exports
31. According to the quantity theory of money an increase in the money supply is most likely
to lead to inflation if:
(a) The velocity of circulation decreases
(b) The number of transactions decreases
(c) There is deflation
(d) The velocity of circulation and the number of transactions is constant
32. A reduction in the money supply is likely to:
(a) Reduce the interest rate (c) Increase the interest rate
(b) Increase inflation (d) Decrease deflation
33. To reduce the supply of money the government could:
(a) Reduce interest rates (c) Buy back government bonds
(b) Sell government bonds (d) Encourage banks to lend
34. The speculative demand for money occurs when:
(a) Individuals hold money just in case an emergency happens
(b) Individuals hold money to buy things
(c) Individuals hold money rather than other assets because they are worried about the
price of the other assets falling
(d) Individuals hold money to shop
35. An outward shift in the demand for money, other things being equal should lead to:
(a) A lower interest rate but the same quantity of money
(b) A higher interest rate but the same quantity of money
(c) A higher quantity of money but lower interest rates
(d) A higher quantity of money but the same interest rate
36. The interest rate in the UK is determined by:
(a) The government (c) The electorate
(b) The Monetary Policy Committee (d) The Federal Reserve Board
37. Open Market Operations occur when the government:
(a) Reduces spending (c) Buys and sells bonds and securities
(b) Increases taxation (d) Increases the exchange rate
38. Demand-pull inflation may be caused by:
(a) An increase in costs (c) A reduction in interest rate
(b) A reduction in government spending (d) An outward shift in aggregate supply
39. Inflation:
(a) Reduces the cost of living
(b) Reduces the standard of living
(c) Reduces the price of products
(d) Reduces the purchasing power of a pound
40. An increase in injections into the economy may lead to:
(a) An outward shift of aggregate demand and demand-pull inflation
(b) An outward shift of aggregate demand and cost push inflation
(c) An outward shift of aggregate supply and demand-pull inflation
(d) An outward shift of aggregate supply and cost push inflation
41. An increase in aggregate demand is more likely to lead to demand-pull inflation if:
(a) Aggregate supply is perfectly elastic (c) Aggregate supply is perfectly inelastic
(b) Aggregate supply is unit elastic (d) Aggregate supply is relatively elastic
Economics
42. An increase in costs will:
(a) Shift aggregate demand
(b) Shift aggregate supply
(c) Reduce the natural rate of unemployment
(d) Increase the productivity of employees
43. The effects of inflation on the price competitiveness of a country's products may be offset
by:
(a) An appreciation of the currency
(b) A revaluation of the currency
(c) A depreciation of the currency
(d) Lower inflation abroad
44. Menu costs in relation to inflation refer to:
(a) Costs of finding better rates of return
(b) Costs of altering price lists
(c) Costs of money increasing its value
(d) Costs of revaluing the currency
45. In the short run unemployment may fall below the natural rate of unemployment if:
(a) Nominal wages have risen less than inflation
(b) Nominal wages have risen at the same rate as inflation
(c) Nominal wages have risen more than inflation
(d) Nominal wages have risen less than unemployment
46. According to the Phillips curve unemployment will return to the natural rate when:
(a) Nominal wages are equal to expected wages
(b) Real wages are back at equilibrium level
(c) Nominal wages are growing faster than inflation
(d) Inflation is higher than the growth of nominal wages
47. The Phillips curve shows the relationship between inflation and what?
(a) The balance of trade (c) The rate of growth in an economy
(b) The rate of price increases (d) Unemployment
Answer Key
1. 11. 21. 31. 41.
2. 12. 22. 32. 42.
3. 13. 23. 33. 43.
4. 14. 24. 34. 44.
5. 15. 25. 35. 45.
6. 16. 26. 36. 46.
7. 17. 27. 37. 47.
8. 18. 28. 38.
9. 19. 29. 39.
10. 20. 30. 40.
Ch. # 12
INTERNATIONAL TRADE
MCQs
1. Which item is 'invisible* in Balance of Payments:
(a) Shipping (c) Export of goods
(b) Import of goods (d) Investment of foreigners
2. Balance of Payment of a country is the record of its:
(a) Import and export during a year
(b) Value of imports and exports of a country during a year
(c) Transactions with the external world during a year
(d) All payments and receipts on Capital Account during a year
Economics
3. If country A commands Absolute Advantage over country B for the Production of
commodity X and Y, it will get:
(a) Comparative Advantage in producing good X
(b) Comparative Advantage in producing both Y good
(c) Comparative Advantage in producing both according to the situation
4. Which one of the following is necessary and sufficient condition for trade between the two
countries?
(a) Comparative difference of cost (c) Absolute difference of cost
(b) Equal difference of cost (d) No one of these
5. Classical Theory of Comparative Cost depended on:
(a) Money Cost (c) Labor Cost
(b) Social cost (d) No one of these
6. In case of trade between the two countries:
(a) Both the countries produce and consume both the goods
(b) Both the countries produce and consume lesser amount of both the goods
(c) Both the countries produce and consume more amount of both the goods
(d) Nothing can be said
7. Production and consumption between the countries which was before trade:
(a) Remains the §ame after trade (c) Remains low after trade
(b) Remains high after trade (d) Nothing can be said
8. Relative difference of price of a commodity between the two counrties depends on :
(a) Technology (c) Endowment of resources
(b) Specialization (d) All the three
9. According to the modern theory of international trade, prices of factors of production due
to trade:
(a) Decrease (b) Increase
(b) Do not changed) (d) Any thing may be possible
10. For calculating the Balance of Payments:
(a) Import -and export of gold should be omitted
(b) Invisible items should be omitted
(c) Foreigners expenditure as imports should not be included
(d) Difference of value of total imports and exports should be observed
11. In International Trade________ currency is used)
(a) Local (c) Foreign
12. The comparative cost theory was introduced by_________
(a) Prof. Marshall (c) Prof. Robins
(b) Prof. Ricardo (d) Prof. Adam Smith
13. Balance of Payment included only___________
(a) Visible good (c) Non invisible
(b) Both (b) Non of them
14. Shipping company is considered as _________ good .
(a) visible (c) Invisible
15. If exports are greater then import then Prop is _________
16. Balance of payments & balance of trade are________ concepts.
(a) Different (c) Same
(b) Identical (d) None of them
17. In international trade factor of production are___________
(a) Mobile (c) Immobile
(b) Fixed (d) None of them
18. Local currency is used in trade.
(a) Foreign (c) Local
(b) International (d) None of them
19. There are _______parts of trade cycle.
(a) 1 (c) 2
(b) 3 (d) 4
20. Which of the following is not an argument for protectionism?
(a) To protect infant industries (c) To increase the level of imports
(b) To protect strategic industries (d) To improve the balance of payments
Economics
21. A demand switching policy to improve the trade position could involve:
(a) Higher interest rates (c) Higher income tax
(b) Tariffs (d) Reduced government spending
22. Free trade is based on the principle of:
(a) Comparative advantage (c) Comparative scale
(b) Economies of advantage (d) Production possibility advantage
23. If a country can produce 10 of product A or 4 of product B the opportunity cost of 1B is:
(a) 0.4A (c) 2.5A
(b) 10A (d) 1B
24. Tariffs:
(a) Decrease the domestic price of a product
(b) Increase government earnings from tax
(c) Increase the quantity of imports
(d) Decrease domestic production
25. The terms of trade measure:
(a) The income of one country compared to another
(b) The GDP of one country compared to another
(c) The quantity of exports of one country compared to another
(d) Export prices compared to import prices
26. In a floating exchange rate system:
(a) The government intervenes to influence the exchange rate
(b) The exchange rate should adjust to equate the supply and demand of the currency
(c) The Balance of Payments should always be in surplus
(d) The Balance of payments will always equal the government budget
27. The balance of payments equals:
(a) The difference between household spending and income
(b) The difference between government spending and income
(c) A measure of the economic transactions between UK residents and the rest of the
worl(d)
(d) The difference between inflation and unemployment
28. If there was a balance of payments deficit then in a floating exchange rate system:
(a) The external value of the currency would tend to fall
(b) The external value of the currency would tend to rise
(c) The injections from trade are greater than the withdrawals
(d) Aggregate demand is increasing
29. To prevent the external value of the currency from falling, the government might:
(a) Reduce interest rates
(b) Sell its own currency
(c) Buy its own currency with foreign reserves
(d) Increase its own spending
30. If the value of the pound in other currencies is strong, then other things being equal:
(a) The price of UK products abroad in foreign currency will fall
(b) The price of UK products abroad in foreign currency will rise
(c) The price of UK products in the UK will rise
(d) The price of UK products in the UK will fall
31. If the value of the pound in terms of other currencies rises:
(a) The spending on UK exports in pounds must rise
(b) The spending on UK exports in foreign currency will rise if demand is price elastic
(c) The demand for UK exports will rise
(d) The spending on UK exports in foreign currency will fall if demand for UK exports is
price elastic
32. The supply of pounds to the currency market will be upward sloping if:
(a) The demand for UK exports is price elastic
(b) The demand for UK exports is price inelastic
(c) The demand for imports into the UK is price elastic
(d) The demand for imports into the UK is price inelastic
33. A fall in the value of the pound is likely to decrease spending on imports if:
(a) The price elasticity of demand for imports is price elastic
(b) The price elasticity of demand for imports is price inelastic
(c) The price elasticity of demand for imports has a unit price elasticity
(d) The price elasticity of demand for exports is price elastic
Economics
34. If the exchange rate is above the equilibrium level:
(a) There is excess demand and the exchange rate should fall
(b) There is excess supply and the exchange rate should fall
(c) There is excess demand and the exchange rate should rise
(d) There is excess supply and the exchange rate should rise
35. If the exchange rate is below the equilibrium level:
(a) There is excess demand and the exchange rate should fall
(b) There is excess supply and the exchange rate shouldfall
(c) There is excess demand and the exchange rate should rise
(d) There is excess supply and the exchange rate should rise
36. To prevent the exchange rate rising the government could:
(a) Sell its currency (c) Increase interest rates
(c) Buy its own currency (d) Sell foreign currency
37. A depreciation of a currency occurs when:
(a) The value of the currency falls
(b) The value of the currency increases
(c) Inflation falls
(d) The balance of payments improves
38. An appreciation of the currency is likely to occur if:
(a) Domestic interest rates fall
(b) There is an increase in demand for imports
(c) There is an increase in demand for exports
(d) There is an increase in the balance of payments deficit
39. A fall in the external value of a currency:
(a) May cause an outward shift in the demand for the currency
(b) May cause an inward shift in the supply for the currency
(c) May lead to a movement along the demand curve for a currency
(d) May be due to a increase in demand for the country's exports
Answer Key
1. 9. 17. 25. 33.
2. 10. 18. 26. 34.
3. 11. 19. 27. 35.
4. 12. 20. 28. 36.
5. 13. 21. 29. 37.
6. 14. 22. 30. 38.
7. 15. 23. 31. 39.
8. 16. 24. 32.
Ch. # 13
PUBLIC FINANCE
MCQs
1. Public Finance include revenue and exp. of ____________
(a) Individual (c) Government
2. The burden of ________tax can be shifted)
(a) Direct (c) Indirect
(b) Income (d) All of hem
3. The burden of _________tax can’t be shifte(d)
(b) Income (d) None of hem
4. Sales tax is a form of _________ tax
5. Wealth tax is a form of____________ tax
Economics
6. Defence is ___________expenditure
(a) Productive (c) None Productor
(b) Both (d) Increasing.
7. ____________ is productive expenditure .
(a) Debt Servicing (c) Law and Order
(b) Infrastructure (d) All of them
8. The rate of Zakat is _____________.
(a) 2% (c) 5 %
(b) 2.5% (d) None of them
9. Zakat is imposed on___________
(a) Christian (c) Hindu
(b) Muslim (d) None of them
10. The major source of revenue of Government is _____________.
(a) Tax (c) Fees
(b) Trade (d) All of them
11. First four cannons of taxations were introduced of Prof. ___________.
(a) Marshall (c) Adam Smith
(b) Ricardo (d) None of them
12. Government borrows to meet its expenditure from:
(a) People only (c) Banks
(b) Foreign countries only (d) All these sources
13. A democratic government:
(a) Makes its income public and keeps expenditure secret
(b) Makes its expenditure public and keeps income secret
(c) Makes a and b public and keeps borrowing secret
(d) Makes income, expenditure and borrowing public
14. A tax is:
(a) Optional payment (c) Not a compulsory payment
(b) Compulsory payment (d) Proportional payment
15. Flat rate of tax without considering income is called: *
(a) Proportional Tax (c) Progressive Tax
(b) Direct Tax (d) Indirect Tax
16. If rate of tax enhances with the increase in income, such a tax is termed as:
(a) Indirect Tax (c) Progressive Tax
(b) Direct Tax (d) All answers are wrong
17. The payment made for any service rendered by government is called:
(a) Remuneration (c) Price
(b) Fines (d) Fees
18. Higher burden of Regressive Tax is on:
(a) Rich (c) Poor
(b) Traders (d) Consumers
19. Digressive Tax is levied on:
(a) Necessities of life (c) Comforts
(b) Luxuries (d) a and b
20. Direct Tax is:
(a) Highly felt (c) Less felt
(b) Mildly felt (d) Not felt
21. Indirect Tax in effect is:
(a) Mild (c) Not felt
(b) Less felt (d) Highly felt
22. Direct Tax:
(a) Includes in price (c) Is not included in price
(b) Not included in loss (d) Is or is not included in price
23. The Principle of Economy regarding tax tells that:
(a) Expenditure on tax collection should be less than tax collected
(b) Expenditure on tax collection should be higher than tax collected
(c) Revenue should be less than expenditure on tax collection
(d) No answer is correct
24. A reflationary (expansionist) fiscal policy could include:
(a) Lower interest rates
(b) Increased lending by the banks
(c) An increase in corporation tax
(d) An increase in discretionary government spending
Economics
25. If the economy grows the government's budget position should automatically:
(a) Worsen (c) Improve
(b) Stay the same (d) Decrease with inflation
26. Fiscal drag occurs when:
(a) Tax bands do not increase with inflation
(b) Tax rates move inversely with inflation
(c) Government spending falls to reduce aggregate demand
(d) Tax bands increase with inflation
27. If the marginal rate of tax is 40% and consumers' income increase from Rs.10,000 to
Rs.12,000:
(a) The amount of tax paid will increase by Rs.4,800
(b) The amount of tax paid will increase by Rs.4,000
(c) The amount of tax paid will increase by Rs.800
(d) The total tax paid will be Rs.4,800
28. Imagine there is no tax on income up to Rs.10000; after that, there is a tax of 50%. What
is the average tax rate on an income of Rs.20000?
(a) Rs.5000 (c) 20%
(b) 25% (d) Rs.10,000
29. The marginal rate of tax paid is:
(a) The total tax paid / total income
(b) Total income / total tax paid
(c) Change in the tax paid / change in income
(d) Change in income / change in tax paid
30. In a regressive tax system:
(a) The amount of tax paid increases with income
(b) The average rate of tax decreases with more income
(c) The average rate of tax falls as income increases
(d) The average rate of tax is constant as income increases
31. The Public Sector Net Cash Requirement (PSNCR) is:
(a) A measure of the government's trade position
(b) A measure of the government's budget position
(c) A measure of the government'stotal debt
(d) A measure of the government's monetary stance
32. A government might use tax to:
(a) Discourage consumption of goods with positive externalities
(b) Discourage consumption of public goods
(c) Discourage consumption of merit goods
(d) Discourage consumption of goods with negative externalities
33. A budget deficit is likely to:
(a) Boost aggregate demand (c) Lead to less import spending
(b) Lead to falling prices (d) Leads to more unemployment
34. If people are made unemployed because of a fall in aggregate demand this is known as:
(a) Frictional unemployment (c) Seasonal unemployment
(b) Cyclical unemployment (d) Structural unemployment
35. Supply-side policies are most appropriate to cure:
(a) Involuntary unemployment (c) Cyclical unemployment
(b) Voluntary unemployment (d) A fall in aggregate demand
36. The natural rate of unemployment is likely to fall if:
(a) Unemployment benefits increase
(b) Income tax increases
(c) More training is available for the unemployed
(d) Geographical immobility increases
37. If the real wage is above the equilibrium level in the labour market:
(a) The quantity demanded of labour is higher than the quantity supplied
(b) The quantity demanded of labour equals the quantity supplied
(c) The quantity demanded of labour is lower than the quantity supplied
(d) The real wage will automatically rise in the short run to bring about equilibrium
38. If there is cyclical unemployment in the economy the government might:
(a) Increase interest rates (c) Encourage savings
(b) Cut taxes (d) Reduce government spending
39. Occupational immobility of labour occurs if:
(a) People lack information
(b) People do not want to work
Economics
(c) People do not have the right skills to accept a new job
(d) People cannot afford to move location
40. Which of the following is not a supply-side measure?
(a) Increased training
(b) Providing more information
(c) Helping individuals to move location to find work
(d) Increasing spending on existing industries
41. Reducing involuntary unemployment:
(a) Helps the economy move on to the Production Possibility Frontier
(b) Helps shift the economy's Production Possibility Frontier outwards
(c) Helps the economy move along its Production Possibility Frontier
(d) Helps the economy move inside the Production Possibility Frontier
42. Less demand in the economy may increase unemployment; this may lead to less
spending which may reduce demand further. This process is called:
(a) The upward accelerator (c) The downward multiplier
(b) The upward PPF (d) The downward mpc
43. To reduce cyclical unemployment the government might:
(a) Increase the budget surplus
(b) Increase the balance of payments deficit
(c) Increase the budget deficit
(d) Reduce government expenditure
Answer Key
1. 11. 21. 31. 41.
2. 12. 22. 32. 42.
3. 13. 23. 33. 43.
4. 14. 24. 34.
5. 15. 25. 35.
6. 16. 26. 36.
7. 17. 27. 37.
8. 18. 28. 38.
9. 19. 29. 39.
10. 20. 30. 40.
Ch. # 14
BUSINESS CYCLE
MCQs
1. Business Cycles is:
(a) An American term (c) A Russian term
(b) A Asian term (d) A Global term
2. For which on of the following term business cycle is used?
(a) Business boom (c) Business oscillations
(b) Business success (d) Business failure
3. What is meant by 'Business Boom'?
(a) Economic Recession (c) Economic failure
(b) Economic prosperity (d) Economic stagnation
4. At the stage of business recession, Unemployment:
(a) Decreases (c) Remains stagnant
(b) Nothing happens (d) Expands
5. Give the famous year of World Depression:
(a) 1930 (c) 1915
(b) 1940 (d) 1910
6. The real cause of Business Cycles is:
(a) Derived Supply (c) Derived Demand
(b) Increase in money quantity (d) Increase in goods quantity
Economics
7. The cause of Business Cycles may be:
(a) Psychological (c) Educational
(b) Recreational (d) Local
8. In the opinion of some of the economists, the cause of business cycles is neither
psychological nor derived demand but it is:
(a) Political (c) Social
(b) Monetary (d) No one of these
9. Increase in rate of interest:
(a) Increase issue of credit
(b) Decreases credit
(c) Position remains stagnant
(d) Both increase and decrease takes place
Answer Key
1. 3. 5. 7 9.
2. 4. 6. 8.

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Economics

1. Who is thought ton be the father of economics?

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