Economics Multiple Choice Questions (MCQs) for General Studies and GK preparation of SSC, NDA, CDS, UPSC, UPPSC and State PSC Examinations.
41. In terms of micro-economics, comparative advantage is based on which of the following?
[A] dollar price
[B] labor cost
[C] opportunity cost
[D] capital cost
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Correct Answer: C [opportunity cost]
Notes:
Opportunity cost is the potential benefits that an investor, individual ora business misses due to choosing an alternate option. It is the forgone benefit.
42. Which if the following is subject matter of microeconomic study?
[A] Study of Cotton Textile Industry
[B] General Price level of commodities
[C] Problem of unemployment
[D] Aggregate demand of the commodities
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Correct Answer: A [Study of Cotton Textile Industry]
Notes:
Price determination of a commodity is a subject matter of microeconomics. The study’of cotton textile industry is also a micro economic study. Study of general price level is a macro economic study. The study of the problem of the unemployment is considered a macro economic study because this problem is concerned with the Indian economy in totality.
43. Which term is used to describe the want satisfying power of a commodity or a service?
[A] Demand
[B] Want
[C] Utility
[D] Consumption
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Correct Answer: C [Utility]
Notes:
Utility is the want satisfying power of a commodity or a service. Law of diminishing marginal utility states that as a consumer consumes more and more units of a commodity, marginal utility derived from successive units goes on fa lling.
44. Which of the following factors don’t affect the demand for a commodity?
[A] Price of commodity
[B] Income of individual consumer
[C] Want of the consumer
[D] Price of related good
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Correct Answer: C [Want of the consumer]
Notes:
Demand for a commodity is the quantity of that commodity which an individual (or buyer) is willing to purchase at different prices within a given period of time. Market demand means the total quantity of a commodity that all its buyers are willing to purchase at different prices over a given period of time. Demand for a commodity depends on a number of factors. The important factors that affect an individual demand for a commodity are: (i) price of the commodity, (ii) income of the individual consumer, (iii) price of related goods and (iv) tastes and preferences of the individual.
45. When the price of a substitute of a commodity X falls, then the demand for X will?
[A] Increase
[B] Decrease
[C] Increase, then decrease
[D] Decrease, then increase
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Correct Answer: B [Decrease]
Notes:
Substitute goods are two alternative goods which could be used for same purpose . It is a product or service that consumer sees as the same or similar to another product . For example , tea and coffee are substitute goods . an increase in price of tea will in demand of coffee . Reason being people take tea and coffee as substitute goods . If the price of tea increases people will prefer coffee as it is cheaper and can be taken as a substitute of tea .Hence if the price of tea falls the demand of tea also falls.
46. What is the total output changes due to changes in all inputs in the same proportion is called as?
[A] Law of Diminishing marginal returns
[B] Law of Increasing output
[C] Law of Returns of Scale
[D] Law of constant returns
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Correct Answer: C [Law of Returns of Scale]
Notes:
The way total output changes due to change in all inputs in the same proportion is known as “law of return to scale”.
47. What is the income elasticity of demand for inferior goods?
[A] equal to 1
[B] greater than 1
[C] less than 0
[D] greater than 0
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Correct Answer: C [less than 0 ]
Notes:
Inferior goods have a negative(less than 0) income elasticity of demand meaning that demand falls as income rises. Inferior goods demand drops when the income of people drops.
48. Which among the following is a factor of production?
[A] Land
[B] Rent
[C] Profits
[D] Interest
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Correct Answer: A [Land]
Notes:
The factor of production are Land, Labour, Capital , Entrepreneurship.The payments made to the factors of production (rents, wages, interest, and profits).
49. Which of the following is a fixed cost to a manufacturing firm in short-run?
[A] Insurance on buildings
[B] Overtime payment to worker
[C] Cost of energy
[D] Cost of Raw Material
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Correct Answer: A [Insurance on buildings]
Notes:
In the short run insurance premium are fixed costs because they are independent of the level of production.
50. Which of the following is a “Public Good”?
[A] A Commodity that is popular among general public
[B] A scheme that benefits the poor
[C] A commodity that is produced by Government
[D] A Commodity whose benefits are indivisibly spread among the entire community
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Correct Answer: D [A Commodity whose benefits are indivisibly spread among the entire community]
Notes:
“Public Good” is a Commodity whose benefits are indivisibly spread among the entire community.
