1.

In Economics, we use the term scarcity to mean;

a) Absolute scarcity and lack of resources in less developed countries.
b) Relative scarcity i.e. scarcity in relation to the wants of the society.
c) Scarcity during times of business failure and natural calamities.
d) Scarcity caused on account of excessive consumption by the rich.
2. A capitalist economy uses-------------------as the principal means of allocating resources.
a) demand
b) supply
c) efficiency
d) prices
3. Which of the following is considered as a disadvantage of allocating resources using the market system?
a) Income will tend to be unevenly distributed.
b) People do not get goods of their choice.
c) Men of Initiative and enterprise are not rewarded.
d) Profits will tend to be low.
4. When economists speak of the utility of a certain good, they are referring to
a) The demand for the good.
b) The usefulness of the good in consumption.
c) The expected satisfaction derived from consuming the good.
d) The rate at which consumers are willing to exchange one good for another.
5. The following diagram shows the relationship between price of Good X and quantity demanded of Good Y.
What we infer from the diagram is ;

a) Good X and Good Y are perfect complements

b) Good X and Good Y are perfect substitutes
c) Good X and Good Y are remote substitutes
d) Good X and Good Y are close substitutes
6. Which of the following statements is true about this consumer?
a) The consumer is not maximizing her utility at point K
b) The consumer is spending her entire income on both goods
c) The consumer gets equal pleasure at points B and K
d) All the above
Refer to the figure below. Answer questions 7 and 8

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7. The effect on consumer surplus of a fall in price from E to F is
a) A decrease in consumer surplus by EFGR
b) A decrease in consumer surplus by AER
c) A decrease in consumer surplus by EFCR
d) None of The above
8. When price rises from F to E, the increase in revenue earned by the seller is
a) Equivalent to area EFGR
b) Equivalent to area EFCR
c) Equivalent to area AER
d) None of the above
9. How would that budget line be affected if the price of both goods fell?
a) The budget line would not shift.
b) The new budget line must be parallel to the old budget line.
c) The budget line must be shifting to the left
d) The new budget line will have the same slope as the original so long as the prices of both goods change in the same
proportion.
10. Which of the following statements is true?
a) Accumulation of capital depends solely on income of individuals.
b) Savings can be influenced by government policies.
c) External economies go with size and internal economies with location.
d) The supply curve of labour is an upward slopping curve.
11. The marginal, average, and total product curves encountered by the firm producing in the short run
exhibit all of the following relationships except:
a) when total product is rising, average and marginal product may be either rising or falling.
b) when marginal product is negative, total product and average product are falling.
c) when average product is at a maximum, marginal product equals average product, and total product is rising.
d) when marginal product is at a maximum, average product equals marginal product, and total product is rising.
12. Which of the following statements is correct?
a) When the average cost is rising, the marginal cost must also be rising.
b) When the average cost is rising, the marginal cost must be falling.
c) When the average cost is rising, the marginal cost is above the average cost.
d) When the average cost is falling, the marginal cost must be rising.
Use the following data to answer questions 16

Output (O) 0 1 2 3 4 5 6
Total Cost (TC) ` 240 ` 330 ` 410 ` 480 ` 540 ` 610 ` 690

13. The average fixed cost of 2 units of output is :

a) ` 80
b) ` 85
c) ` 120
d) ` 205
14. Which of the following is true of the relationship between the marginal cost function and the average
cost function?
a) If MC is greater than ATC, then ATC is falling.

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b) The ATC curve intersects the MC curve at minimum MC.
c) The MC curve intersects the ATC curve at minimum ATC.
d) If MC is less than ATC, then ATC is increasing.
15. Which of the following statements concerning the long-run average cost curve is false?
a) It represents the least-cost input combination for producing each level of output.
b) It is derived from a series of short-run average cost curves.
c) The short-run cost curve at the minimum point of the long-run average cost curve represents the least–cost plant
size for all levels of output.
d) As output increases, the amount of capital employed by the firm increases along the curve.
16. The negatively-sloped (i.e. falling) part of the long-run average total cost curve is due to which of the
following?
a) Diseconomies of scale.
b) Diminishing returns.
c) The difficulties encountered in coordinating the many activities of a large firm.
d) The increase in productivity that results from specialization.
17. The positively sloped (i.e. rising) part of the long run average total cost curve is due to which of the
following?
a) Diseconomies of scale.
b) Increasing returns.
c) The firm being able to take advantage of large-scale production techniques as it expands its output.
d) The increase in productivity that results from specialization.
18. An iso quant shows
a) All the alternative combinations of two inputs that can be produced by using a given set of output fully and in the
best possible way.
b) All the alternative combinations of two products among which a producer is indifferent because they yield the same
profit.
c) All the alternative combinations of two inputs that yield the same total product.
d) Both (b) and (c).
19. In the short run, the firm's product curves show that
a) Total product begins to decrease when average product begins to decrease but continues to increase at a
decreasing rate.
b) When marginal product is equal to average product, average product is decreasing but at its highest.
c) When the marginal product curve cuts the average product curve from below, the average product is equal to
marginal product.
d) In stage two, total product increases at a diminishing rate and reaches maximum at the end of this stage.
20. A firm’s long-run average total cost curve is
a) Identical to its long-run marginal-cost curve.
b) Also its long-run supply curve because it explains the relationship between price and quantity supplied.
c) In fact the average total cost curve of the optimal plant in the short run as it tries to produce at least cost.
d) Tangent to all the curves of short-run average total cost.
21. A firm’s long-run average total cost curve is.
a) Identical to its long-run marginal-cost curve as all factors are variable.
b) Also its long-run total cost curve because it explains the relationship cost and quantity supplied in the long run.
c) In fact the average total cost curve of the optimal plant in the short run as it tries to produce at least cost.
d) Tangent to all short-run average total cost the curves and represents the lowest average total cost for producing
each level of output.

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22. In figure below, possible reason why the average variable cost curve approaches the average totalcost
curve as output rises is:

a) Fixed costs are falling while total costs are rising at rising output.
b) Total costs are rising and average costs are also rising.
c) Marginal costs are above average variable costs as output rises.
d) Average fixed costs are falling as output rises.
23. Assume that when price is ` 20, the quantity demanded is 9 units, and when price is ` 19, the quantity demanded is
10 units. Based on this information, what is the marginal revenue resulting from an increase in output from
9 units to 10 units.
a) ` 20
b) ` 19
c) ` 10
d) ` 1
24. Suppose a firm is producing a level of output such that MR > MC, what should be firm do to maximizeits
profits?
a) The firm should do nothing.
b) The firm should hire less labour.
c) The firm should increase price.
d) The firm should increase output.
25. It is assumed in economic theory that
a) decision making within the firm is usually undertaken by managers, but never by the owners.
b) the ultimate goal of the firm is to maximise profits, regardless of firm size or type of business organisation.
c) as the firm’s size increases, so do its goals.
d) the basic decision making unit of any firm is its owners.

26. Assume that consumers’ incomes and the number of sellers in the market for good A both decrease. Based
upon this information, we can conclude, with certainty, that the equilibrium
a) Price will Increase
b) Price will Decrease
c) Quantity will Increase
d) Quantity will Decrease
27. The firm in a perfectly competitive market is a price-taker. This designation as a price-taker is basedon
the assumption that
a) the firm has some, but not complete, control over its product price.
b) there are so many buyers and sellers in the market that any individual firm cannot affect the market.
c) each firm produces a homogeneous product.
d) there is easy entry into or exit from the market place.

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28. Suppose that the demand curve for the XYZ Co. slopes downward and to the right. We can concludethat
a) the firm operates in a perfectly competitive market.
b) the firm can sell all that it wants to at the established market price.
c) the XYZ Co. is not a price-taker in the market because it must lower price to sell additional units of output.
d) the XYZ Co. will not be able to maximise profits because price and revenue are subject to change.
29. When _____________________________________ , we know that the firms are earning just normal profits.
a) AC = AR
b) MC = MR
c) MC = AC
d) AR = MR
30. When _____________________________________ , we know that the firms under perfect competition
must be producing at the minimum point of the average cost curve and so there will be productive
efficiency.
a) AC = AR
b) MC = AC
c) MC = MR
d) AR = MR
31. When ______________________________, there will be allocative efficiency meaning thereby that the cost
of the last unit is exactly equal to the price consumers are willing to pay for it and so that the right goods are
being sold to the right people at the right price.
a) MC = MR
b) MC = AC
c) MC = AR
d) AR = MR
32. In the long-run equilibrium of a competitive market, firms operate at
a) the intersection of the marginal cost and marginal revenue
b) their efficient scale
c) zero economic profit
d) all of these answers are correct
33. In a very short period market:
a) the supply is fixed
b) the demand is fixed
c) demand and supply are fixed
d) none of the above
34. At price P1, the firm in the figure would produce

a) Zero output

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b) Q3.
c) Q5.
d) Q6.
35. Secular period is also known as
a) very short period
b) short period
c) very long period
d) long period
36. When the monopolist divides the consumers into separate sub markets and charges different prices in different sub-
markets it is known as
a) first degree of price discrimination
b) second degree of price discrimination
c) third degree of price discrimination
d) none of the above.
37. Under the monopolist will fix a price which will take away the entire consumers’ surplus.
a) second degree of price discrimination
b) first degree of price discrimination
c) third degree of price discrimination
d) none of the above.
38. Industries that are extremely sensitive to the business cycle are the
a) Durable goods and service sectors.
b) Non-durable goods and service sectors.
c) Capital goods and non-durable goods sectors.
d) Capital goods and durable goods sectors.
39. Leading economic indicators
a) are used to forecast probable shifts in economic policies
b) are generally used to forecast economic fluctuations
c) are indicators of stock prices existing in an economy
d) are indicators of probable recession and depression
40. Peaks and troughs of the business cycle are known collectively as
a) Volatility.
b) Turning points.
c) Equilibrium points.
d) Real business cycle events.
41. Which of the following is not an example of coincident indicator?
a) Industrial production
b) inflation
c) Retail sales
d) New orders for plant and equipment
42. If increasing air fares increases revenues and decreasing them decreases revenues, then the demand for air travel has
a price elasticity of:
a) Zero
b) Greater than zero but less than one
c) One
d) Greater than one
43. When the perfectly competitive firm and industry are in long run equilibrium then:

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a) P = MR = SAC = LAC
b) D = MR = SMC = LMC
c) P = MR = Lowest point on the LAC curve
d) All of the above
44. Yesterday, seller A supplied 400 units of a good X at ` 10 per unit. Today, seller A supplies the same quantity of units
at ` 5 per unit. Based on this evidence, seller A has experienced a (an)
a) Decrease in supply.
b) Increase in supply.
c) Increase in the quantity supplied.
d) Decrease in the quantity supplied.
45. If oligopolists engage in collusion and successfully form a cartel, the market outcome is
a) The same as if it were served by a monopoly
b) The same as if it were served by competitive firms
c) Efficient because cooperation improves efficiency
d) Known as Nash equilibrium
46. Suppose you find ` 100. If you choose to use ` 100 to go to a football match, your opportunity cost of going to the
game is
a) nothing, because you found the money.
b) ` 100 (because you could have used ` 100 to buy other things) plus the value of your time spent at the game.
c) ` 100 (because you could have used the ` 100 to buy other things) plus the value of your time spent at the game,
plus the cost of the dinner you purchased at the game.
d) ` 100 (because you could have used the ` 100 to buy other things).
47. If a fisherman must sell all of his daily catch before it spoils for whatever price he is offered, once the fish are caught
the fisherman’s price elasticity of supply for fresh fish is _.
a) zero.
b) infinite.
c) one.
d) unable to be determined from this information.
48. The LAC curve
a) Falls when the LMC curve falls
b) Rises when the LMC curve rises
c) Goes through the lowest point of the LMC curve
d) Falls when LMC < LAC and rises when LMC > LAC
49. In long run equilibrium the pure monopolist can make pure profits because of
a) Blocked entry
b) The high price he charges
c) The low LAC costs
d) Advertising
50. If a point on a demand curve of any commodity lies on X Axis then price elasticity of demand of that commodity at
that point will be : __________
a) Infinite
b) More than zero
c) Less than zero
d) Zero
51. The kinked demand hypothesis is designed to explain in the context of oligopoly
a) Price and output determination

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b) Price rigidity
c) Price leadership
d) Collusion among rivals
52. Which of the following falls within the domain of Normative Economics?
a) How national income between different individuals is distributed?
b) What actual wage rate is determined under monopsony in labour market?
c) What wage should be paid to the labourers so that they should not be exploited?
d) None of these
53. “A wise individual or a society likes to provide for its growth of productive capacity.” This requires that a part of its
resources should be devoted to the production of_.
a) Consumer goods
b) Capital goods
c) Defense goods
d) None of these
54. Business economics is a field in which uses economic theory and quantitative methods to analyze business
enterprises.
a) Welfare Economics
b) Development Economics
c) Applied economics
d) None of these
55. Business economics is based on micro economics in two categories--------------and ________________.
a) Positive, Normative
b) Qualitative, Quantitative
c) Both (A) and (B)
d) None of these
56. “Generally a business manager is concerned with problems of his own business units. He does not study the economic
problems of an economy as a whole.” State whether the above statement is___________
a) True
b) False
c) Partly True
d) Partly False
57. A socialist economy is a system of production where goods and services
are produced _.
a) to generate profit
b) directly for use
c) Both (A) and (B)
d) None of these
58. Which one of the following statements is correct regarding socialist economy?
a) Production is planned or coordinated and suffers from the business cycle
b) Production suffers from the business cycle
c) Production is planned and does not suffers from business cycle
d) None of these
59. Which of the following is not a merit of socialist economy?
a) It provides equal access to health care and education
b) Workers are no longer exploited because they own the means of production
c) Profits are not spread equitably among all workers according to their individual contributions.

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d) Natural resources are preserved for the good of the whole.
60. People know utility of goods by means of----------------------
a) price
b) introspection
c) demand
d) desire
61. Being----------------utility varies with different persons.
a) absolute
b) objective
c) subjective
d) None of these
62. An important generalization about demand is described by ---------------------------.
a) Law of demand
b) Factors affecting demand
c) Quantity demanded
d) None of These
63. By way of an optimal choice, a consumer tends to
a) save money
b) purchase large quantity
c) maximize satisfaction
d) maximize satisfaction subject to constraints like tastes and preferences.
64. The economist’s concept of demand is as desire or need or choice or preference or order.
a) the same thing
b) not the same thing
c) (A) or (B)
d) None of these
65. During lockdown due to COVID-19, a consumer finds the vegetable vendors selling vegetables in the street
have raised the prices of vegetables than usual prices. She will buy---------------- vegetables than/as her
usual demand showing the demand of vegetables is-------------------
a) more, inelastic demand
b) less, elastic demand
c) same, inelastic demand
d) same, elastic demand

66. Commodities such as prescribed medicines and salt have __________________ and ___________ hence, have
an -------------------------demand.
a) Several substitutes, elastic
b) Several substitutes, inelastic
c) No close substitutes, inelastic
d) No close substitutes, elastic
67. Let slope of demand curve is (-) 0.6, calculate elasticity of demand when initial price is $ 30 per unit and initial
quantity is 100 units of the commodity.
a) 0.5
b) 5.55
c) (-) 0.5
d) (-) 0.18

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68. Budget line or price line is downward sloping because-------------------
a) There is inverse relationship between the price and demand of a commodity.
b) If a consumer wants to buy more of one good, he has to buy less of other good at given money income.
c) If a consumer wants to buy more of one goods, he has to buy less of other goods as his money income falls.
d) None of these
69. Relationship between slope of supply curve and elasticity of supply can be defined as -
a) Product of slope of supply curve and ratio of quantity supply to price
b) Elasticity of supply is equal to the slope of supply curve.
c) Product of reciprocal of supply curve and ratio of price to quantity supplied
d) Elasticity of supply is equal to reciprocal of slope of supply curve.
70. Elasticity of demand and supply are concepts.
a) Relative
b) Absolute
c) Both (A) and (B)
d) Neither (A) and (B)

71. In the above figure, DD1 is the demand curve of a commodity. There are two points on the demand curve i.e.,
A and B with (P, Q) as (10, 2) & (8, 3) respectively. If the initial point is A OR initial point is B, the price elasticity
of demand will be -

a) same in both cases by point method of price elasticity of demand

b) different in both cases by Arc method of price elasticity of demand
c) same in both cases by Arc method & different by point method of price elasticity of demand
d) None of these
72. Goods X and Y being independent goods, the cross price elasticity of demand (ignoring the sign) between them
will be-
a) 1 (unit elastic)
b) less than 1
c) greater than 1
d) Zero
73. Condition of equilibrium using utility analysis of demand can be expressed as
a) MUX/PX = QX
b) PX QX = MUM
c) MUX/PX = MUY/PY = MUM
d) MUX = MUM
74. Law of diminishing marginal rate of substitution is associated with
a) Marshall
b) Hicks
c) Slutsky

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d) Keynes
75. According to principle of diminishing marginal rate of substitution-
a. One commodity must be decreased while other is increased
b. Commodity which is increased has higher marginal significance
c. Commodity which is decreased has higher marginal significance
d. Neither qualitative nor quantitative concept Of these statements:
a) Only a is correct
b) Both a and b are correct
c) Both a and c are correct
d) All are correct
76. Assertion (A): In the short run, a producer operates in only II stage of Law of Diminishing Returns Where
average product of variable factor is declining.
Reason (R): In stage I and stage III the marginal product of the fixed and the variable factors respectively are
negative.
a) (A) is true and (R) is false
b) Both (A) and (R) are true & (R) is the correct explanation of (A)
c) Both (A) and (R) are true & (R) is not the correct explanation of (A)
d) (A) is false and (R) is true
77. Assertion (A): An iso-cost line is a straight line.
Reason (R): The market rate of exchange between the two inputs is constant.
a) (A) is true and (R) is false
b) Both (A) and (R) are true & (R) is the correct explanation of (A)
c) Both (A) and (R) are true & (R) is not the correct explanation of (A)
d) (A) is false and (R) is true
78. Consider the following statements about the relationship between cost and production-
1. When AP rises, AVC falls
2. When AP reaches at maximum, AVC is minimum
3. When AP falls, AVC rises
Which of the above statements is correct?

a) 1&2
b) 3 only
c) 1, 2 & 3
d) 2&3
79. The areas of all rectangles formed by drawing perpendiculars on both axis from different points on AFC curve
are___________
a) same
b) different
c) (A) or (B)
d) can’t be determined
80. The size of a monopolist’s plant and the degree of utilization of any given plant size depend entirely on the------
---------------

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a) Factor price
b) Price of good
c) Market demand
d) Market supply
81. Marginal revenue along with marginal cost helps to determine
a) Profit maximizing output
b) Profit/unit
c) Price/unit
d) Total revenue
82. Imperfect competition arises when
a) There is imperfect rivalry among competitors
b) There are unexplainable imperfections in the market
c) Competition does not exist
d) Product variation, ignorance of consumers and distance & transportation costs lead to Imperfection in the
competitive market which operates on certain assumptions.
83. Marginal cost is equal to marginal revenue, average cost is equal to average revenue, average revenue is equal
to marginal revenue and average cost is equal to marginal cost.
This is the condition of-
1. Long period equilibrium for a firm under oligopoly
2. Short period equilibrium for a firm under oligopoly
3. Long period equilibrium
4. Long period equilibrium for a firm under perfect competition
5. Short period equilibrium for a firm under perfect competition
a) 1 & 5 only
b) 3 & 4 only
c) 3 & 1 only
d) 2 only
84. At a particular price level, there are no forces tending to move it either up or down means
1. The firm is in equilibrium
2. The price in equilibrium
3. The equilibrium price of the firm
4. The equilibrium price & quantity of the firm
a) 1 & 4 only
b) 1, 2 & 4 only
c) 3 & 1 only
d) 4 only
85. When a firm is maximizing profit i it will necessarily be
a) Maximizing profit per unit of output.
b) Maximizing the difference between total revenue and total cost.
c) Minimizing total cost
d) Maximizing total revenue
86. imperfectly competitive firm

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a) Total revenue curve is straight upsloping line because a firm’s sales are independent of product price.
b) The marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold.
c) The marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
d) Marginal revenue curve lies below the demand curve because any reduction in price applies to only extra unit sold.
87. During an upturn in the business cycle the negative output gap does not become much more negative than it
was. This is because of the fact that:
a) Capacity increases because of the rise in investment.
b) Expenditure decreases because of the rise in the interest rate.
c) The government lowers the taxes during an upturn.
d) Labour productivity decreases during upturn.
88. Business cycle emerge in-------------------------
a) Socialist economy
b) Free market economy
c) Mixed economic system
d) None of the above
89. Cyclical business refers to
a) The business where demand fluctuates seasonally.
b) The business which keep on changing their product.
c) The business whose fortunes are closely related to the rate of economic growth.
d) All of the above
90. Suppose in an economy the population growth rate remained 6% during last 5 years while the economic
growth rate during the same period was just 3%.
What will be the consequences of it? Select the right option from the options given below.
a) Lesser savings Lower investment Low income & employment Low effective demand Overall slowdown in
economic activities
b) More consumption expenditure more demand more production more employment & income Overall boom in
economic activities
c) Increase in labour supply Lower wage rate Low income Low savings & investments Low production Overall
slowdown in economic activities
d) None of the above
a) Robinson
91. Snob effect is explained as ______
a) It is a function of consumption of others
b) It is a function of price
c) Both (a) and (b)
d) None of these
92. If the cross elasticity is only- slightly below zero which of the following is correct?
a) They are weak complements
b) Negative and very high they are strong complements
c) Both (a) and (b)
d) None of these
93. Monopolistic Competition has features of
a) Monopoly and competition with features of monopoly predominating
b) Monopoly and competition with feature of Competition predominating
c) Monopoly but not competition
d) None of these

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94. Supply and Stock are ________
a) Different
b) Same thing
c) Having no comparison
d) Both (a) and (c)
95. Marginal Cost can be directly derived from
a) Total Variable Cost
b) Total Fixed Cost
c) Average Cost
d) Average Fixed Cost
96. A firm normal profit earned are included in ___
a) Explicit Cost
b) Implicit Cost
c) Variable Cost
d) Fixed Cost
97. The law of demand is :
a) Irreversible in nature
b) Reversible in nature
c) Both (a) and (b)
d) None of these
98. During recession what will be the market demand for new cars?
a) Demand Curve will shift to the right
b) Demand curve will shift to the left
c) Demand will not shift but the quantity of cars sold per month will decrease
d) Demand will not shift but the quantity of cars sold per month will increase
99. Economic indicator required to predict the turning point of business cycle is :
a) Leading indicator
b) Lagging indicator
c) Coincident
d) All of the above
100. A decrease in the demand for mobile phone other things remaining the same will _____
a) Increase purchase the number of mobile phone bought
b) Decrease the price but increase the number of mobile phone
c) Decrease in quantity of mobile phone demanded
d) Decrease the price and decrease in the number of Mobile Phone bought
101. Price discrimination is desirable as :
a) It promotes equity
b) It makes production feasible
c) Both (a) and (b)
d) None of these
102. Marginal Revenue Curve lies ________ its demand curve in monopolistic competition due to _____
a) Below ; Product differentiation
b) Above - ; Barriers to entry
c) Above ; Product – differentiation
d) None of these

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103. Normative economics can be explained through :
a) Fairness to tax
b) Incidence to tax
c) Effect of tax on incentives to work
d) None of these
104. What will be the situation if factor prices and factor quantities move in the same direction
a) A decreasing Cost Industry
b) Increasing Cost Industry
c) Constants Cost Industry
d) All of these
105. A fall in the price of a commodity where everything else is held constant is referred to as:
a) An increase in quantity demand
b) A decrease in demand
c) An increase in demand
d) None of these
106. A theory is :
a) An assumption
b) A hypothesis
c) A validated hypothesis
d) None of these
107. When the demand curve is a rectangular hyperbola an increase in the price of the commodity causes the total
expenditure of consumers of the commodity to:
a) Remain unchanged
b) Increase
c) Decrease
d) Any of the above
108. A movement along a curve rather than a shift in the curve can be measured by:-
a) Cross elasticity of demand
b) Income elasticity of demand
c) Price elasticity of demand & Price elasticity of Supply
d) None of these
109. How do the TVC curve behaves when the law of diminishing return begins to operate-
a) Rise at a decreasing rate
b) Fall at an increasing rate
c) Fall at a decreasing rate
d) Rise at an increasing rate
110. In the Short run level of output the firm at the optimum will be:
a) Minimizing total losses
b) Maximizing total profit
c) Either maximizing total profit or minimizing total losses
d) None of these
111. If the monopolist incur losses in the short run then in the long run:
a) It will stay in the business
b) Go out of business
c) Will break even
d) Any of the above is possible

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112. A cartel which is market sharing will reach the monopoly situation :
a) Always when the product is homogenous
b) Always when the product is differentiated
c) Sometime
d) None of these
113. Who describes production function as the relationship between the maximum amount of output can b e
produced and the input required to make that output :
a) Samuelson
b) Malthas
c) Hicks
d) None of these
114. In a monopolistically competitive market:
a) Firm face a perfectly elastic demand for its product
b) Does not face a perfectly elastic demand for its product
c) Cannot be determined
d) None of these
115. Variable that change after real output change are:
a) Leading Indicator
b) Lagging Indicator
c) Concurrent Indicator
d) None of these
116. Modern business activities are based on the anticipations of business community and are affected by waves of
optimism or pessimism is opined by___
a) Pigou
b) Keynes
c) Hawtrey
d) None of these
117. Businesses whose fortunes are closely linked to the rate of economic growth is referred to as :
a) Cyclical
b) Counter Cyclical
c) Fiscal Policy
d) None of these
118. According to Hicks and Allen the demand curve slope downwards due to _____
a) Law of diminishing marginal utility
b) Income effect and substitution effect
c) Either (a) or (b)
d) None of these
119. When two goods are perfect substitute for each other:
a) Indifference curve for these two goods are straight parallel line with a constant slope along the curve
b) Indifference curve has a constant MRS
c) Concave to the Origin
d) Both (a) and (b)
120. Behavior of Supply depends upon:
a) Phenomenon Considered
b) Degree of possible adjustment in supply
c) Time Period under Consideration

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d) All the above
121. What are the main assumption of Production Function:
a) Relationship between inputs and output exists for a specific period of time
b) There is a given state of the art in production Technology.
c) Input consideration Included in a particular function output resulting from their utilization is at the maximum level.
d) All the above
122. Which of the following statements is correct?
a) In a two-good economy, the production possibilities frontier reflects the maximum amount of one good that can be
produced when a given amount of the other good is produced.
b) Microeconomics is the study of the behavior of the economy as a whole.
c) Positive economics focuses on welfare of the people of a society
d) None of the above
123. Which of the following is not part of the opportunity cost of going on holiday?
a) The money you spent on a theatre show
b) The money you could have made if you had stayed at home and worked
c) The money you spent on airline tickets
d) The money you spent on food
124. In the case of a straight line demand curve meeting the two axes, the price elasticity of demand at y-axis of the
line would be equal to
a) 1
b) infinity
c) 3
d) 1.25
125. A firm under perfect competition will be making minimum losses (in the short run) at a point where:
a) MC > MR
b) MR> MC
c) MC = MR
d) AC = AR
126. When the consumer is in equilibrium his price line is--------------to indifference curve
a) Parallel
b) At right angle
c) Diagonally opposite
d) Tangent
127. The Law of variable proportions examines the Production function with:
a) One factor variable and only one factor fixed
b) One factor variable keeping quantities of other factors fixed
c) All factors variable
d) None of the above
128. When two goods are perfect substitutes of each other then
a) MRS is falling
b) MRS is rising
c) MRS is constant
d) None of the above
129. In case of necessaries the marginal utilities of the earlier units are large. In such cases the consumer surplus will
be:
a) Infinite

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b) Zero
c) Marginally positive
d) Marginally Negative
130. When economists speak of utility of a certain good, they are referring to:
a) the demand for the good
b) The usefulness of the good in consumption
c) the expected satisfaction derived from the consumption of good.
d) The rate at which consumers are willing to exchange one good for another
131. If the goods are perfect substitutes for each other then cross elasticity is
a) Infinite
b) One
c) Zero
d) None of the above
132. Consumer Surplus is:
a) What a consumer is ready to pay + what he actually pays
b) What a consumer is ready to pay – what he actually pays
c) What he actually pays – what a consumer is ready to pay
d) None of the above
133. Mohan sweets is a small restaurant and a price taker. The table below provides the data of Mohan’s Sandwich
output and costs in Rupees

Quantity TC TFC TVC AVC AC MC

0 100
10 210
20 300
30 400
40 540
50 790
60 1060

If Sandwiches are being sold for Rs. 14 each, what is Mohan’s profit maximizing level ofoutput?
a) 10 Sandwiches
b) 40 Sandwiches
c) 50 Sandwiches
d) 60 Sandwiches
134. Effective Demand depends on:
a) Desire
b) Means to purchase
c) Willingness to use those means
d) All of the above
135. Quantity demanded is a:
a) Flow Concept
b) Stock Concept
c) Both (a) and (b)
d) None of the above

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136. If as a result of 90 percent increase in all inputs, the output increase by 75 percent this is a case of
a) Increasing return of a factor
b) Decreasing return to a factor
c) Diminishing return to scale
d) None of the above
137. Excess Capacity is the essential characteristic of the firm in the market form of:
a) Monopoly
b) Perfect competition
c) Monopolistic competition
d) Oligopoly
138. According to Hawtrey trade cycle is a _
a) monetary Phenomenon
b) unplanned Phenomenon
c) fiscal Phenomenon
d) all the above
139. Which of the following describe a typical business cycle?
a) economic expansions are followed by contractions.
b) inflation is followed by rising income and unemployment.
c) economic expansion are followed by economic growth and development.
d) stagflation is followed by Inflationary growth.
140. Marginal Product is the slope of –
a) marginal product curve
b) average product curve
c) total product curve
d) implicit product curve
141. Law of Production does not include _
a) least cost combination of factors
b) law of variable proportion
c) law of diminishing returns to a factor
d) return to scale
142. Foreign Exchange market is an example of –
a) perfect competition
b) oligopoly
c) monopoly
d) monopolistic competition
143. The Relationship between AR, MR and Price Elasticity –
a) MR = AR X e-1 ÷ e
b) AR = MR X e-1 ÷e
c) A R – MR = e-1 ÷e
d) None of these
144. Price discrimination is possible when
a) seller should have some control over the supply of the Product
b) price elasticity of the product should be different in different submarket
c) seller should be able to divide his market into two or more submarket
d) none of these

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145. The shape of TR curve of the monopolist is :
a) u shaped
b) inverted u shaped
c) downward sloping
d) none of these.
146. The distinction between selling cost and production cost was made by:
a) Chamberlin
b) Sweezy
c) Mrs Joan Robinson
d) None of these
147. When goods are complementary the indifference curve is :
a) is a straight line
b) is convex to the origin
c) consist of two straight line with a right angle bent.
d) none of these
148. The Consumer is in equilibrium when:
a) the budget line is tangent to the indifference curve
b) marginal rate of substitution of one good for another must be equal to the price ratio of the two goods
c) either a or b
d) none of these
149. The producer’s demand for a factor of production is governed by the------------------of that factor.
a) price
b) marginal productivity
c) availability
d) profitability
150. The problem what to produce relates to:
a) choice of goods and services
b) distribution of Income
c) choice of technique
d) market value of goods and services
151. The marginal utility from last unit consumed of commodity Y = 50 Units and MUm = 10. The consumer is in equilibrium
and consuming commodity y only. Find the Price of Commodity Y—
a) 5
b) 10
c) 40
d) None of these
152. When total demand for a commodity whose price has fallen increases it is due to:
a) Price effect
b) Income effect
c) Substitution effect
d) Complementary effect
153. Production is the organized activity of transforming resource into finished products in the form of goods and services
and the objective of production is to satisfy the demand of such transformed resources:
a) Jamed Bates and J.R Parteinson
b) Malthus

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c) Walras
d) Lipsey

154. What are the assumptions of Production Function:

a) Relationship between inputs and output exists for a specific period of time.
b) There is a given ‘state of the art’ in the production technology.
c) Both (a) and (b)
d) None of these
155. Perfect Competition is closely represented by:
a) Stock Market
b) Wheat Market
c) Soft Drinks Market
d) None of these
156. The budget line is also known as:
a) Production Possibility Curve
b) Consumption Possibility Curve
c) Iso Utility Curve
d) None of these
157. When will a firm decides to exit the industry:
a) Total curve starts rising
b) Marginal cost starts rising
c) Average cost starts rising
d) Price is less than LAC
158. Electricity Companies sells electricity at a cheaper rate in rural areas than for industrial use due to :
a) Price Discrimination
b) Perfect Competition
c) Monopolistic Competition
d) None of these
159. For a Price taking firm:
a) Marginal revenue is less than Price
b) Marginal revenue is equal to Price
c) The relationship between behavior marginal revenue and Price is indeterminate
d) Marginal revenue is greater than price
160. According to whom fluctuations in economic activities are due to fluctuations in aggregate effective demand:
a) ScIumpeter
b) Pigou
c) Keynes
d) Hawtrey
161. Variables that change before the real output changes are called:
a) Lagging indicator
b) Leading Indicator
c) Concurrent Indicator
d) None of these
162. Indifference Curve analysis is superior to utility analysis:
a) It dispenses with the assumption of measurability
b) It segregates income effect and substitution effect

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c) It does not assume constancy of marginal utility of money
d) All of the above

163. The shape of the Cost curve depends upon:

a) Cost function
b) Factor of Production
c) Outlay
d) None of these
164. For Substitute products the demand is:
a) Downward sloping
b) Horizontal
c) Upward Sloping
d) None of these
165. Delphi technique was developed by:
a) Robinson
b) Olaf Helmer
c) Amartya Sen
d) None of these
166. When α = 3/5 and β = 2/5 the return to scale for Cobb Douglas Production function are:
a) Increasing
b) Decreasing
c) Constant
d) First decreasing and then increasing
167. How to Produce is related to:
a) Product’s Choice
b) Choice of technique
c) Either (a) or (b)
d) None of these
168. Economy’s historical performance was reflected by:
a) Lagging indicating
b) Leading indicating
c) Either (a) or (b)
d) None of these
169. Which of the following statements is correct?
a) When the slope of the demand curve is zero, demand is infinitely elastic and when the slope is infinite, elasticity is
zero.
b) When the slope of the demand curve is zero, the elasticity is also zero and when the slope is infinite, elasticity is
also infinite.
c) When the slope of the demand curve is zero, the elasticity is unity and also when the slope i s infinite, elasticity is
unity.
d) None of these
170. Marshallian theory of consumer’s behavior is based on
a) Hypothesis of additive utilities.
b) Hypothesis of independent utilities.
c) Both (A) and (B)
d) Weak ordering

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171. Consider the following statements and select the correct answer from the given options.
Assertion (A): Demand curve is vertical when elasticity of demand is zero.
Reason (R): Marginal utility of a product is increasing
a) Both (A) and (R) are true and (R) is the correct explanation of (A)
b) Both (A) and (R) are true and (R) is not the correct explanation of (A)
c) (A) is true but (R) is false
d) (A) is false but (R) is true
172. A factor of production is said to be superior if its expenditure elasticity
a) is negative
b) lies in unit interval
c) exceeds unity
d) is zero
173. In economics, we are concerned with
a) Value in use only
b) Exchange value only
c) Both value in use and exchange value
d) None of the above
174. If a firm’s total revenue is not enough to make good even the---------------, it is better for firm to shut down.
a) Total fixed cost
b) Marginal cost
c) Average fixed cost
d) Total variable cost
175. Price of goods express their
a) Value in use
b) Exchange value
c) Economic value
d) Both (B) and (C)
176. When demand increases and supply decreases,
a) the equilibrium price and quantity both rise
b) the equilibrium price and quantity both fall
c) the equilibrium price rises but nothing certain can be said about the change in equilibrium quantity.
d) the equilibrium quantity rises but nothing certain can be said about the change in equilibrium price.
177. If the market demand curve for a commodity has a negative slope then the market structure must be:
a) Perfect competition
b) Monopoly
c) Imperfect competition
d) The market structure cannot be determined as the information is insufficient
178. Decrease in input demand _.
a) Doesn’t affect inputs prices
b) Pushes inputs prices up
c) Pulls inputs prices down
d) Either (B) or (C)

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