MCQS ECONOMICS From Sir Rizavi,s Book

Chapter 6,

1. Given a demand function Qd = 100 - 2P and P = 10, the price

elasticity of demand is

a. 2
b. -2
c. -0.5
d. -0.25

2. if demand for a good is elastic

a: a rise in price increases consumer's expenditure on that good

b. a fall in price increases consumer's expenditure on that good
C. change in prices results in no change in expenditure
d nothing can be said about price-expenditure relationship *
e. none of the above

3. Given the following possibilities, when will consumer's expenditure

on the good decrease?
a. demand is unitary elastic and price falls
b. demand is elastic and price rises:
c. demand is inelastic and price falls
d. 'a' & 'c
e. b'& 'c".

4 if price rises by 10% and quantity 'demanded decreases by 8%

a. Demand is elastic
b. Demand is inelastic
C. Supply is elastic
d. Supply is inelastic
e. None of the above

5. If the percentage effect of price of a substitute on the quantity

demanded of a commodity is expressed as
a. Income elasticity
b. Cross elasticity
C. Price elasticity
d. Taste elasticity
e. None of the above

6. If the price elasticity of demand for good 'X' is less than one,
then 'X' can be

a. A luxury
b. A necessity
a. Highly elastic
d. Unitary elastic
e. None of the above
7. For normal goods, income elasticity is
a. Zero
b. Positive
c. Negative
d. Greater than one
e. None of the above

8. If price of a substitute increases by 10% and the quantity demanded

of the good increases by 5% then the cross elasticity will be
a. 1/2
b. 1/4
C. zero
d. 2
e. none of the above

9. For normal goods

a. Price elasticity of demand is positive and income elasticity is
negative
b.: Price elasticity of demand is negative and cróss elasticity is
negative
c. Both Price elasticity and income elasticity are negative
d. Price elasticity of demand is negative and income elasticity of
demand is positive
e. Both price and income elasticity are positive

10. Determinants of elasticity of supply include

a. time
b. Stocks
C. International trade restrictions
d. All of the above
e. None of the above.

11. Increase in international trade restrictions normally

a. Have nothing to do with elasticity
b. Effect elasticity of demand
c. Effect elasticity of supply
d. Effect both elasticity of demand and supply
e. None of the above is true.

12. In the long run

a. Elasticity of supply is greater than short run
b. Elasticity of supply is less than short run
c. Elasticity of demand is less than short run
d. b'& 'c'
e. 'a' & 'c'

13, For a luxury

a. Price elasticity of demand is positive
b. Demand is highly elastic
C.. Demand is less elastic
d. Supply is less elastic
e. 'None of thè above

14. If price rises from 10 to 20 Rs., quantity demanded fall from 100
to 50, the point elasticity of demand at Rs; 10 is
a. 1/2
b, ¼
c.-1/2
d. 1
e. 2

Chapter 7,

1. If both demand and supply rise, what happens to equilibrium price?

a. it will increase
b. It will decrease
c. It will not change
d. Nothing can be said
e. First Price will rise then fall

2. If demand rise by 10% and supply rise 50%, what happens to

equilibrium price?

a. it will increase
b. It will decrease
c. It will not change
d. Nothing can be said
e. First Price will rise then fall

3. In a shortage situation, price will

a. Rise
b. fall
c. be unchanged
d. Nothing can be said
e. First fall and then rise.

Chapter 8,

1. Production can be explained as

a. A process to use labor, capital and other factors to create new
commodities
b. A process to transform inputs into output
C. Creating goods using factors of production
d. All of the above
e. None of the above
2 production function is
a. a mathematical formula
b. a relationship between goods and services
C. a relationship between labor, capital, etc.
d.: a relationship between inputs and outputs
e. none of the above

3. The relation between inputs and out put is give by

a. law of eventually diminishing returns
b. law of variable proportions
c. laws of production
d. all-of the above
e. none of the above

4 Marginal Product is
a. The slope of the production function
b. Rate of change of output w.r.t. one input
c. Change in TP/change in some variable input
d. All of the above
e. None of the above

5. At maximum total product, marginal product is

a. Zero
b. Negative
c. Positive
d. Negative and rising e. None of the above

6. In the second stage of production

a. MP falls and TP remains constant
b. MP falls and total product increases
C. Marginal product increases and TP falls
d. MP increases and TP remains constant
e. None of the above

7. Law of returns are also called

a. Laws of revenues
b. Laws of inputs
c. Laws of diminishing revenues
d. Laws pf increasing revenues
e. Laws of costs

8. The returns may diminish because

a. Only one variable. factor is combined with fixed factors of
production
b. The labor becomes weaker
c. Machines depreciate
d. All of the above
e. None of the above1.
Chapter 9,

1. Cost can be explained as

a. Initial investment to start a business
b. Sum of rewards to the factors of production.
c. Flow of daily expenditures
d. Cash spend.
e. None of the above

2. Marginal cost is
a. Derivative of total cost
b. Slope of total cost curve
c. Rate of change in cost per unit of output.
d All of the above
e. none of the above

3. According to the traditional theory of cost, Total cost function

with a U-shaped MC can be represented by
a. A linear equation
b. A quadratic equation
c. A cubic equation
d. An exponential function
e. none of the above

4. According to the traditional theory of cost, Plant size can be

represented by
a. Long run average cost curve b. A short run average cost curve
c. Long run marginal cost
d. All of the above
e. None of the above

5. Planning curve is another name for

a. Fixed cost curve
b. A Short run marginal cost curve
c. Long run marginal cost curve d. Short run average cost curve
e. Long run average cost curve

6. Traditional cost theory is based on the law of variable

proportions. In the second stage of production
a. Marginal cost increases
b. Marginal cost decreases
c. Marginal cost is constant
d. Marginal product increases
e. Total product falls
7. According to the traditional theory of cost, Long run average cost
is U- shaped because of
a. Economies of scale
b. Diseconomies of scale
c. U-shape of Short run average cost curve
d: 'a' & 'b'
e. 'a' & 'c'

8 Marginal cost curve intersects average cost curve at a. Minimum

total cost
b. Minimum fixed cost
c. Minimum marginal cost
d. Minimum average cost
e. None of the above

9. The planning curve may eventually rise because of

a. Managerial inefficiencies
b. Lack of planning
c. Political events-
d. All of the above
e. None of the above

10. L-shaped long run average cost is related to

a. Classical cost theorists
b. Modern cost theorists
c. Macroeconomists
d. Accountants
e. None of the above

Chapter 12,

1. The characteristics of perfect competition include

a. A single firm
b. A homogeneous products
C: Small number of buyers
d. Restricted entry and exit
e. None of the above

2. Perfect competition is
a. A market structure
b. A union of firms,
c. Market where firms have perfect control over price
d. A market where MR = AR = 0
e. None of the above

3. At short-run super normal profit under perfect competition

a. MR = TR = P= MC
b. MR AC=P MC
c. MR = AR = R = AC
d. MR = AR P= MC
e. None of the above

4. Under perfect competition with short run super normal profit

a. AC<MC
b. AC> MC
c. AC= MC
d. AC= AR
e. AR = MC

5. In the long run under perfect competition,

a. LAC< LMC
b. LAC > LMC
C. LAC = LMC = AR = MR = P
d. LA> AR > MR
e. None of the above

6. For equilibrium under perfect competition required condition is

that
a. Slope of MR > slope of MC
b. Slope of MC > slope of MR
c. Slope of MR = slope of MC
d. Slope of MC< slope of MR
e. None of the above

7. A shut down point is actually

a. A long run situation
b. A long run profit maximization
c. short run loss minimization
d. A point where revenues are zero
e. None of the above

8. In the long run under perfect competition, firms earn only normal
profits because
a. Costs are high
b. Government does not allow super normal profits
c. Prices are very low
d. Taxes are high
e. Free entry and exit of firms is possible

9. Under perfect competition in the short run, the supply curve of the
firm is actually her
a. Marginal cost curve
b. Average cost curve
c. Input supply curve
d. Marginal revenue curve
e. None of the above
10. Under perfect competition in the long run, the industry supply
curve is derived by
a. intersection of demand and supply curves
b. adding all marginal costs
c. adding all supply curves
d. all above can be used
e. none of the above

11. If a firm feels that she can not cover her average total cost in
the short run, the firm will decide to
a. Permanently shut down
b. Temporarily shut down
C. Do nothing because nothing can be done
d. Increase production
e. Decrease production

12. Perfect competition

a. Is often the market situation
b. Is always the market situation
a In never the market situation
d. Is rarely the market situation
e. None of the above

13. Which of the following statement is correct under perfect

competition
a. Prices are out of the control of the individual firm
b. Prices are determined by demand and supply in the industry
c. Prices are taken as fixed for an individual firm
d. All of the above
e. None óf the above

14. If the price per unit of a product in the market is Rs. 20. and
average cos is Rs. 18 then the firm is earning
a. Normal profits
b. Super normal profits
c. Nothing
d. Rs. 20 per unit
e. None of the above

15. Under perfect competițion, the demand is

a. 'Inelastic
b. Infinitely elastic
C.Less elastic
d. Minimum possible
e. None of the above
Chapter 13,

1. The characteristics of monopoly include

a. A single firm
b. Control over price
c. Barriers to entry of firms
d.: Free entry and exit
e. All of the above

2. Monopoly is
A market structure
b. A union of firms
c. Market where many firms have perfect control over price
d. A market where MR = AR
e. None of the above

3. Under Monopoly, the industry is

a. Constituted of a large number of firms
b. Larger than the firm
c. More powerful than the firm
d. The firm itself
e. None of the above

4. Under monopoly, in the short run

a. Loss is possible
b. Loss is not possible
c. Super normal profit is possible
d. 'a' & 'b'
e. 'a' & 'c'

5. In the Long run under monopoly,

a. The firm earns super normal profits
b. The firm earns normal profits
c. The firm may face loss
d. All above are possible
e. The firm must shut down

6. For equilibrium under monopoly a required condition is that

a. Slope of MR < slope of MC
b. MC=MR.
c. AR > LAC
d. All of the above
e. None of the above

7. In the long run under monopoly, firms can earn super normal profits
after
a. Entry and exit of firms
b. Forcing all firms to increase their price
c. Bribing the government officials
d. Successive plant size adjustments
e. Producing at highest possible levels
8. Monopoly
a. Is often the market situation
b. Is always the market situation
C. In never the market situation
d. Describes all markets in developing countries
e. None of the above

9. Which of the following statement is correct under monopoly

a. Prices are out of the control of the individual firm
b. Prices are controlled by the monopolist
C. Prices are taken as fixed for an individual firm
d. All of the above
e. None of the above

10. Under monopoly, as compared to perfect competition, the demand is

a. More elastic
b. Has the same elasticity
c. Less elastic
d. Greater than perfect competition
e. None of the above1.

Chapter 14,

1. Monopolistic competition is a model related to

a. Perfect competition
b. Imperfect competition
c. Monopoly
d. All of the above.
e. None of the above

2. "The theory of monopolistic competition' is authóred by

a. Joan Robinson
b. Edward Chamberlin
C Heinrich Von Stackelberg
d. Alfred Marshall
e. Adam Smith

3. Freedom of entry of firm is a characteristic of

a. Perfect competition
b. Monopoly
c. Monopolistic competition
d. 'a' & 'c'
e. 'a' & 'd'
4 An assumption of monopolistic competition not found in perfect
competition is
a. Free entry of firms
b. Product differentiation
e. Large number of buyers/sellers
d. All of the above
e. None of the above

5.'Every firm has some degree of monopoly’ power can be a statement

related to
a. perfect competition
b. monopoly
c. monopolistic competition
d. all of the above
e. none of the above

6. Advertising –
a. Normally shifts the demand curve to the right
b. May increase the slope of demand curve
c. May cause a decrease in elasticity of demand
d. All of the above
e. None of the above

7. In the long run, a firm operating under monopolistic competition

earns
a. Normal profit
b. Super normal profit
c: Negative profit
d. Positive economic profits
e. None of the above

8. Under oligopoly, we find

a. One seller
b. Two sellers
c. few sellers
d. Many sellers
e. Any number of sellers

9. Sweezy’s kinked demand model is related to

a. Oligopoly
b. Perfect competition
c. Monopolistic competition
d. All of the above
e. None of the above

10. Cartel is a type of

a Perfect competition
b. Monopoly
c. Monopolistic competition
d. All of the above
e. None of the above
Chapter 1,

1. Economic problems arise because

a). Various religions exist
b) Rich people do not pay tax
c) there are limited resources but unlimited wants
d) all of the above) none of the above

2. The one who believe that economics is related to scarcity of resources

and multiplicity of wants will be called
a) å classical economist
b) a neo-classical
c) modern economist
d) 'not an economist

3. Human being is the focus of study in the definition of eçonomics by.

a) Alfred Marshall
b) Adam Smith
c) Paul A, Samuelson
d) Aristotle

4. Scarcity definition or the modern definition of economics was given by

a) Alfred Marshall
b) Adam Smith
c) Pigou.
d) Lionel Robbins

5. Multiple ends and scarce means is part of definition of economics by

a) Alfred Marshall
b) Robbins
c) Adam Smith
d) Aristotle

6."The.concept of welfare is not clearly defined and cannot be measured"

is true for which definition of economics.
a) Classical
b) Neo-classical
c) Modern .
d) None of the above

7. While using inductive method, we move from

a) particular to general
b) general to particular d) both 'a' and 'b'
c) model to theory

8. Macroeconomics studies topics like

а) national income
b) consumer behavior.
c) individual welfare
a) demand and supply
9. Microeconomics studies topics like
a) National·Income
b) Economic growth
c) demand and supply
d) b'and 'c'

10. "The Principles of Economics" (1890) was written by

a) Aristotle
b) Robbins
c) Adam Smith
d) Alfred Marshall

11. Microeconomics deals with

a) Consumers
b) Producers
c) Factors of production
d) All of the above

12. Macroeconomics deals with

а) Nations
b) International Trade
c) Development
d) All of the above

Chapter 2,

1. The Utility of a specific good refers to

a. the demand for the good
b. the usefulness of the good in consumption
c. The characteristic of the good to satisfy a human want
d: All of the above
e. None of the above

2. For the optimum combination of goods X and Y

a. The ratio of Marginal uțilities to price is equal for all commodities
b. TUX/Pxis equal to TUyPy
c. Px (TUy) = Py (TUx).
d. All of the above.
e None of the above

3. Economists use the term marginal utility to mean

a. Additional satisfaction gained by additional cost of the last unit
b. Total satisfaction gained when consuming a given number of unit.
c. Satisfaction gained by the consumingan additional unit of a good
d. The utility if all available units of a commodity are consumed
e: None of above
4. The following must hold true for the law of diminishing marginal
utility
à Utility should be subjective
b. Utility should be additive
C. Consumption should be continuous.
d All of the above
e. None of the above.

5. If a consumer derives marginal utilities for 6 successive units of à

commodity as 12, 10, 8, 6, 4 and 2 respectively, the total utility after
consuming the fourth unit will he
а. 30
b. 40
c. can not be calculated
d. the same as marginal utility
e. none of the above

6. Total utility is maximum when

a. Marginal utility is zero
b. All the units are consumed
c. Marginal utility is maximum
d. Total utility intersects marginal utility
e None of the above

7. The area under the marginal utility curve represents

a. largest value of marginal utility
b. demand
c. Marginal utility
d. Total utility
e. The number of unit of the commodity consumedy

8. If a consumer is at equilibrium point, change in the combination

consumed while remaining within the same budget limits, total utility will
а. Decrease
b. Iпсrease
c. Not change
d. Vanish
e, Be negative

9. Utility theory is attributed to

a. Walras
b. Marshall
C. Gossen
d. All of the above
e.: ' None of the above
10. ‘Utility, is, an ex ante concept' means that
a. After consumption the consumer knows what utility she gained
b. Consumer know the utility before consuming
c. Ütility changes before consumption
d. The quality of the commodity worsens for every extra unit
e. The concept of utility is very old1.

Chapter 3,

1. Indifference Curves slope negatively because

a. They åre convex to origin
b. To show same level of satisfaction, the increase of units of one
commodity must be offset by decrease in the units of the second
c. The do not intersect each other.
d. All of the above
e. None of the above

2. Which of the following is not a property.of a normal

indifference.curve?
a. It is convex to the origin.
b. The marginal rate of substitution is.decreases as you increase t units
of one commodity along the IC.
C. It will not intersect another IC of the same individual.
d. It intersects one of the axis
e. It slopes negatively.

3. A price consumption curve can most easily be derived by joining the

tangency points of various ICs and Price lines by
a. Keeping income constant and varying the commodity
b. Keeping income constant and varying the price of one price of both
commodities •
C. Keeping prices constant and varying the income of the consumer
d. Varying both income of the consumer and price of the commodity.
e. Just shifting the price line parallel upwards.

4. Anincome consumption curve can be most easily derived by joining the

tangency points of various ICs and Price lines by
a. Keeping income constant and varying the price of one commodity
b. Keeping income constant and, varying the commodities.
c. Keeping prices constant and varying the income of the consumer
d. Varying both income of the consumer and price of the commodity
e. Just shifting the price line parallel upwards.
price of both

5. A ten percent increase in income of the consumer will

a. Shift the price line parallel upwards
b. Shift the price line parallel downwards
c. Rotate the price line clockwise on the x-axis.
d. Rotate the price line clockwise on the y-axis e. - Result in no change
6. A ten percent increase in the price of the good represented on the x-
axis will
a. Shift the price line parallel upwards
b. Shift the price line parallel downwards
c. Rotate the price line clockwise on the x-axis
d. Rotate the price line clockwise on the y-axis
e. Result in no change

7. A ten percent increase in the price of both the commodities will

a. Shift the price line parallel upwards
b. Shift the price line parallel downwards
c. Rotate the price line clockwise on the x-axis
d. Rotate the price line clockwise on the y-axis
e. Result in no change

8. A ten percent increase in income of the consumer will

a. Shift the price line parallel upwards

b. Shift the price line parallel downwards
c. Rotate the price line clockwise on the x-axis
d. Rotate the price line clockwise on the y-axis
e. Result in no change

9. The marginal rate of substitution is

a. The slope of the price line
b. The slope of the indifference curve
c. The length of the indifference curve
d. The length of the price line
e. none of the above

10. The consumer is in equilibrium when *00

a. The slope of the budget line is zero
b. "The slope of indifference curve is negative
c. The marginal rate of substitution is maximum
d. The marginal rate of substitution is equal to the ratio of prices
e: All points on the indifference curve lie above the price line

Chapter 4,

1. Demand is
a. The amount of a commodity that consumers want to purchase
b. A relationship between quantity demanded and price
c. The amount of a commodity that consumers can purchase
d. The inquiries made about a commodity
e. None of the above

2. Shift factors in the demand function are

a. The factors that continuously shift curve
b. The factors, the change of which, can shift the demand
c. The factors, the change of which, can shift the quantity demanded
d. The factors, the change of which, changes the slope of demand curve
e. None of the above
3. All of the following are shift factors of demand function except:
а. Price
b. Tastes-
c. Supply
d. Price of other goods
e. Expectations of future price change

4. The 'law of demand' implies that, ceteris paribus,

a. Demand varies directly with price.
b. Demand varies inversely with price.
c. Demand has nothing to do with price.
d. Demand always increases when price changes.
e. Demand always decreases when price changes.

5. The quantity demanded of a normal product increases when

a. The consumer's income decreases
b. The price of the product falls.
C. The priċe of a substitute falls.
d. All of the above.
e. None of the above

6. We may observe a rise in demand when

a. There is a general rise in income
b. Population grows.
c. The price of the substitute increases.
d. All of the above.
e None of the above

7. The 'ceteris Paribas' assumption of the law of demand includes that

a. The price does not change
b. The quantity demanded does not change
c. The expectations about future price do not change
d. All of the above
e. None of the above

8. Extension and contraction in demand are caused by

a. Income changes
b. Price changes
c. Population changes
d. All of the above
e. None of the above

9. For the equation, Qd = 330 - P, of the demand curve, the slope of the
demand curve is
а. -1
b. 330
C. 2d.
d. P
e. None of the above
10. The demand equations for two consumers are Q= 50 -P and Q = 50,
2P. The market demand equation (assuming only two consumers) would be
a. Qd = 20-P
b. Qd = 5050-2P
с. Оd = 100-2P
d. Qd = 50-3P
е. Qd = 3D 100- ЗР

Chapter 5,

1. Supply is
a. The amount of a commodity that is produced
b. A relationship between quantity supplied and price
c. The availability of raw material for production of the commodity.
d. All of the above.
e. None of the above

2. Shift factors in the supply function are.

a. The factors that continuously shift
b. The factors, the change of which, can shift the supply curve
c. The factors, the change of which, changes the slope of supply curve
d. All of the above
e. None of the above

3. All of the following are shift factors of supply function except:

а. Price
b. Cost of production
c. Price of inputs
d. Tax
ė. Political Stability

4. The 'law of supply' implies that, ceteris paribus,

a. Supply varies directly with price.
b. Supply varies inversely with price:
c. Supply has nothing to do with price.
d. Supply always increases when price changes.
e. Supply always decreases when price changes.

5. The quantity supplied of a normal product increases when

a. The cost of production increases:
b. The price of the product falls.
c. The price of the product rises:
d. All of the above.
e. None of the above
6. We may observe a rise in Supply when
a. There is a cut in taxes on inputs
b. There is political stability.
c. Technology improves.
d. All of the above.
e. None of the above

7. For the supply curve Q8 =c + dP , the shift factors have an impact on

the value of
a. d
b. с
с. Р
d. All of the above
e. None of the above1.

Chapter 15,

Distribution theories explain

a. Distribution of produced wealth among factors of production
b: Distribution of bribe money among government officials c. Distribution
of power among politicians d: Distribution of oil resources among
developed nations
e. None of thè above

2. In a competitive Labor market, wage rate is determined by

a. The Owners of a firm
b. Developed countries
c. Demand and supply of Labor
d. Demand and supply of goods
é. None of the above

3. According to marginal productivity theory, the price of a factor, in

the long run will be equal to
a. The factor's available quantity
b. The price decided by the government
C. The factor's price in other countries
d. The factors marginal revenue product
e. None of the above,

4. Marginal productivity is also called

a. Marginal revenue product
b. Marginal physical product
c. Marginal product of a factor
d. All of the, above.
e. None of the above
5. In the marginal productivity theory, the supply of Labor is
a. Inelastic
b. Perfectly elastic
c. Highly elastic
d. equal to population
e. None of above.

6. The modern theory of factor pricing discussed here assumes that Labor
supply is
a. Perfectly elastic
b. Inelastic
c. Less than perfectly elastic
d. infinite
e. None of above