Question
------------ is also known as Envelope Curve
(a) Economic information is usually scarce and costly to
acquire (b) Economic information is usually not required for
rational decision making.
A change in price keeping other things remaining constant will
cause
A change in the quantity demanded of Product X is due to a
change in
A characteristic of monopolistic competition is:
A circular-flow diagram is used to describe
A decrease in interest rate will:
A fall in prices makes consumers feel more wealthy. As a
result
A firm economic profit is equal to revenue less
A firm practising price discrimination will be
A floating exchange rate
A market structure with a few firms is known as
A monopolist has no supply curve because:
A monopolistic competitor earns --------------- in the long run
A movement in demand is due to
A nation has an unfavorable balance of trade when
A nation's merchandise trade balance reflects
A perfectly competitive firm is
A perfectly competitive firm would shut down if:
A person finds Rs.2000 on the street. If he decides to use the
money to go to an IPL match, his opportunity cost of going to
the game is
A phenomena of stagflation is due to
A purely competitive firm will be willing to produce at a loss in
the short run provided
A rational person who currently subscribes two magazines is
trying to decide whether he should subscribe to a third. What
should determine his decision?
A shift in demand is NOT due to
A shift in supply is due to
A situation under which economic stagnation in the form of a
low rate of growth, combines with the rise in the general price
level is called:
A situation when prices increase at a very rapid speed so that
the value of money falls drastically is called as
A typical demand curve can not be
A unique feature of oligopoly is
According to comparative advantage theory international
trade will not take place between two countries if
According to the law of diminishing marginal utility:
Aggregate demand is the total demand for final goods and
services in an economy at a given time. Changes in aggregate
demand may take place because of changes in money supply
as well as because of changes in government expenditure
among other factors. Thepurpose of both ï¬ scal and
monetary policy is to control aggregate demand. At times, too
high growth in aggregate demand can lead to inflation while
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Ans:
Long run average cost curve
Statement (a) is true but statement (b) is false.
movement in the demand curve
change in the price of the product X
Differentiated products.
The flow of income and expenditures in an economy.
Increase the quantity of money people want to hold
there is a movement down a given aggregate demand curve.
total opportunity costs.
Charging different prices in different markets of a product
adjusts in response to market forces
oligopoly.
As demand changes, each output level can be consistent with
more than one profit-maximizing price
Zero Economic profit
change in the price of the product
the value of its imports of goods is greater than the value of
its exports of goods
trade in tangible products
price taker and hence cannot determine price but can
determine the amount of output to be sold.
AVC>AR
Rs.2000 as he could have used the money to buy other things
plus the value of his time spent at the game.
fall in real GDP and price increase
the loss is no greater than its average variable coss
The additional cost of the third magazine compared to the
additional benefit the person would get from the third
magazine.
change in the price of the product
all of the above
Stagflation
Hyperinflation
rising upward to right
interdependence between the few firms
All of the above
Total utility will rise at a falling rate as more units are
consumed
Change in quantity of money à change in rate of interest
à change in investment à change in aggregate demand Ã
change in price level
fall in aggregate demand can result in a recession and rising
unemployment. Fiscal policy seeks to regulate aggregate
demand by two instruments primarily govt. expenditure and
taxation while monetary policy seeks to control the by directly
controlling the money supply or by altering the rate of
interest.A fall in interest rates encourages more borrowing
and raises aggregate demand while a rise in interest rates will
dampen aggregate demand.Question €“ 4Changes in money
supply leads to change in aggregate demand, whichin turn can
give rise to inflation. Identify the right sequences in which
changes in money supply leads to changes in price level
All of the following are variables that can be manipulated to
affect fiscal policy except one. Which one is that? The interest rate
All the following are U-shaped curves except: AFC curve
Along a demand curve real income is assumed to be constant. always false
An individual demand curve slopes downwards from left to
right because: All of the above
An individual seller in perfect competition will not lower price
because he can sell any amount at the market price
An isoquant is a locus of factor input combinations that give the same level of output
As the economy nears full capacity, the short-run aggregate
supply curve becomes steeper.
Assume that the market demand curve for soft drink is known
and given to us. With the onset of summer, price remaining
the same, the consumer would move to a higher demand curve
At any given price level which of the following is not going to
increase real GDP demanded an increase in net taxes
Automatic stabilisers act to __________ government
expenditures and __________ government revenues during
recessions. increase; decrease
Average cost increases in the long run with an expansion in
firm size due to all of the above
Balance of payment is an application of Double entry book keeping
C + I + G + (X-M) refers to aggregate expenditure
Choose the correct one -1
Consumer surplus is measured graphically as the area below the demand curve and above price.
Consumption in the expenditures approach in calculating GDP
includes: Purchases of medical services at a local clinic
Consumption under expenditure approach for calculation of
GDP will include spending by households on medical services at a local hospital
Convexity of the iso-quant curves is because of: Decreasing marginal rate of technical substitution
CPI is useful in all of the above
Demand Curve faced by a monopoly firm is inelastic
The correct option is "To the customers and also save on
Demand curve of a perfectly competitive industry is supply costs"Score:- 2
Demand for a commodity refers to: Amount of the commodity demanded at a particular price
Demand-pull inflation is caused by an outward shift of the aggregate demand curve
Difference between the short run and long run is based on flexibility of fixed input
Discriminating monopoly implies that the monopolist charges
different prices for his commodity: All of the above
Economics is a study all of the above
Economics is a study of limited resources and unlimited wants
Economics is the study of how society manages its scarce resources.
percentage change in output due to percentage change in
Elasticity of production is variable input.
Equilibrium price is the market clearing price
Expilcit cost refers to the cost of factors hired by a firm for production

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Firms under perfect competition in the short run can earn
only All of these
Fiscal policy in India is prepared by Ministry of Finance.
Fiscal policy is used to influence macroeconomic variables like all of the above
Fiscal policy means: Policy relating to public revenue and public expenditure
For a downward sloping linear demand curve the slope of
marginal revenue (MR) curve is twice as much as the slope of the average revenue (AR) curve
For a given price level aggregate demand curve shifts if there
is change in (a) government expenditure (b) investment
expenditure Both (a) and (b)
For a rectangular hyperbola demand curve elasticity of demand is equal to one
For calculation of GDP of India which of the following is NOT
included production done by NTPC in Iran
For indexing the dearness alloowance to employees for an
increase in price level ---------- is useful. CPI-IW
For short-term policy decisions -------- is more useful. WPI
GDP is a poor measure of social well-being because the value of leisure time is not counted in GDP
GDP is a poor measure of the social well being because: The value of leisure time is not counted in GDP
Treats the money spent on guns the same as the money spent
GDP is not a perfect measure of welfare because it: on education
Given the budget and the price of factor inputs isocost line all combinations of labour and capital that will cost the
represents producer the same amount of money.
Given the same cost and revenue schedules, a profit-
maximising monopolist will produce less output than a competitive industry
Government purchases are assumed to be autonomous
because they are independent of the level of real GDP
Measuring the impact of production on air pollution, water
pollution, soil depletion, and the loss of other natural
Green GDP means resources.
Households act as demanders when they demand goods and services from firms and the government
Households act as suppliers when they provide resources to firms and governments
the consumer will increase his consumption of X and decrease
If (MUx / Px) > (MUy / Py) then his consumption of Y.
If a firm average cost curve is falling, than marginal cost curve
must be: Below average cost curve
If a resource that has no alternative use than its opportunity
cost is zero
If an increase in the price of product €˜X€™ shifts the demand
for product €˜Y€™ rightward and, conversely, if a decrease in
the price of €˜X€™ shifts demand for €˜Y€™ leftward then X and Y are substitute products
If GDP is greater than GNP of a country, then its: Net factor income earned from abroad is negative
If good is a luxury, its income elasticity of demand would be: Positive and greater than one
If marginal benefit is greater than marginal cost, a rational
choice involves: more of the activity
If marginal utility is zero: Total utility is maximized
If MPC is 0.8 and the government purchases increase by
$5,000, real GDP demanded will Increase by $25,000
If the cross elasticity of demand between product €˜X€™ and
product €˜Y€™ is positive then X and Y are substitute goods.
If the demand for a good is inelastic, an increase in its price
will cause the total expenditure of the consumers of the good
to: Increase
if the economy is already producing its potential, the spending
multiplier in the long run is Zero
If the income elasticity of a good is greater than one but less
than zero then a) it is a normal good. b) it is a necessary good.
c) it is an inferior good. Both (a) and (b) are right.

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If the MU from consuming two goods are equal and the
consumer is spending all of his or her money income, The
consumer is in equilibrium.
If the prevailing price in the market is more than the average
variable cost (AVC) of production, the firm would:
If the quantity of money demanded is less than the quantity
of money supplied, then the interest rate will
If the short run aggregate supply curve has a positive slope,
effective fiscal policy to correct for an expansionary gap will:
If the short-run aggregate supply curve has a positive slope,
effective fiscal policy to correct for an expansionary gap will
If the the government wants to close a contractionary gap
using fiscal policy, then it can
If total revenue on a good falls with fall in price, this indicates
If transfer payments and autonomous taxes both increase by
identical amounts:
Implicit cost refers to the cost of
Implicit costs are calculated on the basis of:
In a perfectly competitive market , a firm in the long run will
be in equilibrium when:
In autarky
In case of the dominant-strategy solution each firm
In determining comparative advantage, cost is measured in
terms of
In economics market refers to
In macroeconomics, we analyze
In monopoly market, AR curve is always ------------- the MR
curve.
In New Zealand one worker can produce 40 walking sticks or
10 boomerangs each hour. What is the opportunity cost of
producing one walking stick?
In perfect competition there is large number of sellers.
In the circular flow of income and expenditure
In the context of circular flow of income and expenditure
which of the following statements is not correct?
In the context of national income accounting depreciation
In the long run analysis the efficient area of production is
denoted by
In the long run if elasticity of production is greater than one
then
In the long run zero substitutability between the factor inputs
is a feature of
In the price rigidity model of oligopoly market, when some
firms increase their price, why do the other firms not follow?
In the short run , when the output of a firm increases, its
average fixed cost:
In the short run as long as marginal product of labour
increases at an increasing rate
In the short run as long as the marginal product exceeds the
average product,
In the short run perfectly competitive firm will shut down
In the third stage of the law of variable proportions, stage of
negative returns occurs when:
Unrestricted
False.
Continue production
decrease.
Reduce both the price level and real GDP
reduce both the price level and real GDP
decrease taxes by less than the size of the gap
the price elasticity of demand is less than one
There will be no change in the equilibrium income
factors owned by the producer and used for production
Opportunity cost
P = AR=MR=AC=MC
each country's consumption possibilities are the same as its
production possibilities
ignores the decisions of the other firms
opportunities forgone
Both option 1 and option 2
the overall performance of the economy as a whole
Above
1/4 of a boomerang
Large number of sellers means every seller is selling a small
amount in relative sense.
Injections are equal to leakages
Firms sell factors of production to households
is the loss of value of Capital assets.
the area which is to the right of upper ridge line and to the
left of lower ridge line
the firm is experiencing increasing returns to scale
Input output isoquant
Because of the elastic nature of the demand
decreases
total product increases at an increasing rate
the average productivity of the variable factor increases as
input increases.
when average variable cost is more than average revenue.
Total product declines, MP is negative
In which of the following industries do firms set prices? monopoly markets, but not competitive markets
Income elasticity of demand is defined as the responsiveness
of: Quantity demanded to a change in income
Increase in money supply leads to Demand Pull Inflation.
Increase in total utility as a result of the consumption of an
additional unit is known as Marginal Utility
Inflation in an economy including those sectors of the market
which may experience sudden inflationary spikes such as
energy is indicated by Headline Inflation
Inflation rate differs in different regions of a country MAINLY
due to difference in differece in housing prices
Inflation results in a decline in the --------- Purchasing power of money
Interest on borrowed capital falls in the category of: Production costs
International trade is most likely to occur whenever each of the trading nations gains from trade
Intersection of the market demand and supply curve of a good
helps in determination of all of the above
Investment under expenditure approach for calculaton of GDP spending by a business house on purchase of new plant and
will include machinery
Iso-Quants are right angled only when: Factors are compliments
production can be increased in the short run by employing
Law of dminishing marginal returns shows that variable input with fixed input
Macroeconomics deals with: economic aggregates.
Macroeconomics is the study of aggregate economic behaviour
Marginal costs are closely related with: Variable cost
Marginal reasoning is used in both accepting or rejecting a business proposition
Marginal utility curve of a consumer is also his demand curve
Markets of cement, alunimium and automobiles are examples
of oligopoly
by decreasing the time spent searching for information about
Markets reduce transactions costs goods and services
MC = MR and MR = AR means The equilibrium position of a firm under perfect competition
MC curve cuts --------- curves at their minimum points. AVC & AC
Microeconomics deals with the study of income of an individual
Mixed income of the self employed means: Combined factor payments which are not distinguishable
MR is equal to: The change in p x q due to a unit change in output
Multiplier is defined as 1/ 1-MPC
National Income denotes sum total of all factor earnings in the economy.
National Income of a country is also known as: NNP at Factor Cost.
Net value added is equal to: Payments accruing to factors of production
Nominal GDP is based on prices prevailing in the year when production takes place
Oligopoly can emerge due to all of the above
that which we forgo, or give up, when we make a choice or a
Opportunity cost is decision.
Opportunity cost refers to the cost of sacrificed alternatives
Other thing remaining constant, as a result of a decrease in
income, an individual's demand for inferior goods will rise
Other things being equal, a decrease in an economy exports decrease domestic aggregate expenditures and the
will equilibrium level of output
Other things constant, a decrease in real GDP demanded is
caused by a(n) decrease in government purchases
Other things remaining constant quantity demanded of
money varies inversely with the market interest rate.
Paid-up cost€ is the name given to: Out-of-pocket€ cost
Payments which are made to factors of production to
compensate for the toil and trouble in rendering their services
are known as: Real costs
Per capita national income means: NNP ÷ Population

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Perfect competition is a market structure that is characterised large number of buyers and sellers with no influence on the
by equilibrium price
Price discrimination would be profitable only when elasticity
of demand of the monopolist product is ------ in different
markets. Different
Product method of measuring national income is known as: Value added method
---------refers to that portion of total deposits of a commercial
bank which it has to keep with RBI in the form of cash
reserves. CRR
Rise in the MPC, other things being held constant,: Increase the value of the multiplier
Statement A: an increase in the price of pizza, other things
constant, increases the opportunity cost of pizza. Statement
B: Because of higher opportunity cost of pizza consumers will
reduce demand for other goods and increase the quantity
demanded of pizza Statement A is correct but statement B is not correct.
Statement A: Firms in monopolistic competition are not
producing at minimum average cost. Statement B: Firms in
monopolistic competition have excess capacity Both statement A and statement B are true
Statement A: Money income is simply the number of rupees
received per period. Statement B: Change in price level keeps
the money income constant but may increase or decrease the
real income. Both statement A and statement B are correct.
Statement A: The division of tax burden depends on
elasticities of demand and supply. Statement B: More inelastic
the demand curve and more elastic the supply curve, the
larger is the burden on consumer. Both statement A and statement B are true.
Statement A: The price elasticity of demand varies along a
downward sloping linear demand curve. Statement B: This is
because the slope of a linear demand curve changes from
point to point. Statement A is correct but statement B is not correct.
Supply of a commodity is always related with: Price of the commodity
Supply of a good and its price have: Positive relationship
Suppose a firm is producing a level of output such that MR
> MC, What should the firm do maximise its profit? The firm should increase output
Suppose the technology for producing personal computers
improves and at the same time, individuals discover new uses
for personal computers so that there is greater utilisation of
personal computers. Which of the following will happen to
equilibrium price Quantity will increase; price cannot be determined
That fraction of change in disposable income that is consumed
is called: The marginal propensity to consume
The €˜Tatkal€™ facility for reservation offered by Indian
Railways is an example of price discrimination of -------------
degree. Second
The aggregate expenditure line will shift downwards with a rise in the price level
The aggregate expenditure line, along with the 45 degree line,
determines equilibrium. This model is based on the Producers are ready to supply whatever amount of output is
assumption that: demanded at the existing price level
The aggregate expenditure line, along with the 45-degree line,
determines equilibrium. This model is based on the producers are ready to supply whatever amount of output is
assumption that demanded at the existing price level
The AR curve and the industry demand curve are same in case of monopoly
The base year for a price index is the year that serves as a reference point
The base year for a price index is the year: That serves as a reference point
The basis of the benefits of specialization is comparative advantage
The circular flow of goods and incomes shows the relationship
between: firms and households

Unrestricted
The Consumer Price Index measures the changes in price of all goods and services consumed by a household
The costs which arise due to the change in the level of
business activity are called: Incremental cost
The demand curve faced by a monopolistic competitive firm is less elastic than a purely competitive firms demand curve
The demand curve faced by a perfectly competitive firm is perfectly elastic
The demand for money is based primarily on money's role as
a(n) medium of exchange
The economy will expand if: Injections exceed leakages
a movement to the left along a given aggregate demand
The effect of an increase in the price level is represented by curve.
The effect of an increase in the price level is represented by a movement to the left along a given aggregate demand curve.
few firms large in size and producing homogenous or
The features of Oligopoly are differentiated product
The Financial account records (a) international purchases of
assets such as stocks, bonds, and bank balances. (b)
international purchases of real assets such as land, housing,
factories. Both option (a) and option (b) are correct
The four components of GDP are consumption Investment, government purchases, and net exports.
The horizontal demand curve parallel to the x-axis implies that
the elasticity of demand is: Infinite
The response to a price increase is less than the response to a
The kinked demand curve model of oligopoly assumes that: price decrease
The Law of Demand can be explained with the help of both 1 and 2
The 'law of demand' implies that other things remaining same as prices fall, quantity demanded increases.
marginal utility decreases with increase in consumption of an
The Law of dminishing marginal utilitys states that that additional unit
The law of variable proportions examines the production
function with: One factor variable keeping quantities of other factors fixed
The market structure which has single seller, no substitutes
for the products and entry of new firms is completely blocked
is Monopoly
The market structure which have large number of firms
producing and selling homogeneous products and the
customers have full knowledge about the equilibrium price is Perfect competition
The market structure which have large number of sellers,
selling differentiated products and freedom to entry and exit
is Monopolistic Competition
The money demand curve describes how the quantity of
money demanded changes with the interest rate
the lower the interest rate, the lower the opportunity cost of
The money demand curve slopes downward because holding money
lower the interest rate the lower the opportunity cost of
The money demand curve slopes downwards because holding money
The money demand curve will shift when there is a change in nominal GDP
The monopolist charges different prices from different byers
for the same product is known as Price Discrimination
The most realistic type of isoquant is Kinked isoquant
The negatively sloped portion between the ridge lines in an
isoquant map represents economic region of production
The opportunity cost of holding money increases when the interest rate rises
The positively sloped (rising) part of the long run average cost
curve is due to which of the following? Diseconomies of scale
the long-run tendencies between changes in the price level
The purchasing power parity theory is a good predictor of and the exchange rate of two countries
The ratio of the change in the equilibrium level of income to a
change in some autonomous increase in spending is the multiplier.
The reason for cost-push inflation is a decrease in aggregate supply but aggregate demand is

Unrestricted
 constant
The reason for demand-pull inflation is a rise in aggregate demand but aggregate supply is constant
During which some resources become fixed and some become
The short run is a period of time: variable
The similarities between perfect competition and
monopolistic competition include easy entry and exit
The slope of the aggregate expenditure line under simple
aggregate expenditure model depends on MPC
The solution in the prisoner's dilemma is called the dominant-strategy equilibrium
Quantity of the good offered for sale at a particular price per
The supply of a good refers to: unit of time
The term "utility" means satisfaction
The term autarky means a state or society which is economically independent
There no such thing as a free lunch This statement is true as even at zero price, good or service has a cost
Those who desire that policymakers stabilize the economy
would advocate which of the following when employment is
above the natural rate? decrease government expenditures
To close a contractionary gap using fiscal policy, the
government can increase government spending by less than the size of the gap
bank rate should be increased and cash reserve ratio
To control inflation the increased
To measure a real change in the economic situation of a
country --------- should be taken into consideration. real GDP
To practice price discrimination which of the following is NOT
necessary demand curve faced by the seller should be elastic
Transaction of financial assets (shares, stocks etc) cause Keep national income unaffected.
not included in GDP because they do not represent payments
Transfer payments are for currently produced goods or services.
Transfer Payments refer to payments which are made: Without any exchange of goods and services
Unanticipated inflation creates problems for society because redistributes income and wealth
Under Oligopoly, kinked demand curve hypothesis is designed
to explain: Price rigidity
Under which market structure, though the firms earn normal
profit in the long run, there is always €˜excess capacity€™
with them? Monopolistic Competition
the sense of pleasure or satisfaction derived from consuming
Utility is goods and services
Velocity of money increases because of (a) increase in
frequency of payments (b) increase in store value of money
(c) increase in inflation rate (a) and (c) but not (b)
What effect is working when the price of pizza falls and
consumers tend to buy it instead of other goods? the substitution effect.
What is the shape of demand curve faced by a firm under
perfect competition? Horizontal
What is true of marginal cost when It is positive and decreasing.
What will be the economic situation of the monopolist in the
long run? Will always earn supernormal profits
When GDP increases budget deficit decreases
When is average product at its maximum point? When AP intersects MP
When is TP maximum? When MP becomes zero
When National Income is calculated with reference to a base
year, it is called: Real National Income
When price level rises very rapidly leading to inflation money loses its use as a store of value
When the price of a normal good falls, more of it is purchased
because of both the substitution effect and the income effect
When the total product in the short run is maximum then the marginal product is equal to zero
When total utility is falling than marginal utility is negative and decreasing

Unrestricted
When total utility is maximum than marginal utility is zero
Which among the following best describes an intermediate
good: It helps in the production of other goods
Which among the following costs remains constant in the
short run as output increases? TFC
Which among the following is a constant elasticity supply
curve? All of these
Which among the following is a determinant of elasticity of
supply? Both of these

Which among the following is a feature of Oligopoly market? Indeterminateness of the demand curve
Which among the following is incorrect? AFC=TC/Q
Which among the following is not a cause of the economies of
production? Government policies
Which among the following is true regarding the MPC and the
Multiplier? The lower the MPC, the lower would be the Multiplier
Which market structure symbolises the existence of €˜few
sellers€™ Oligopoly
Which of the following about €˜resources€™ in economics is
not true? Capital refers to the amount of money invested.
Which of the following assumptions is usually made about
government purchases They are autonomous.
Which of the following can increase real GDP per person? All the options are correct.
Which of the following equations is used to express quantity
theory of money? MV = PY
Which of the following factor does not determine the cost of
producing a good? Level of demand
Which of the following industries most closely approximates
monopolistic competition detergents
Which of the following industries most closely approximates
the oligopoly model airlines
Which of the following is an intangible item in the BOP
statement? Banking services provided in other countries
Expansionary gap is the excess of actual GDP over potential
GDP and government adopts a contractionary fiscal policy to
Which of the following is correct? address the issue.
Which of the following is known as long run average cost
curve? Planning curve
Which of the following is least likely a feature that
monopolistic competition and perfect competition have in
common? Extensive advertising to differentiate products
Which of the following is likely to be present in a perfectly
competitive market? Firms producing identical commodities
Which of the following is not a basis for trade between two
nations? one nation's absolute advantage
Which of the following is not a characteristic of a price
taker€ firm? Negatively-sloped demand curve
Which of the following is not a characteristic of monopolistic
competition? A homogenous product
Which of the following is not a current account transaction? External commercial borrowings
Which of the following is not a feature of Monopolistic
Competition? Absence of advertising
Which of the following is not a feature of perfectly
competitive market? Heterogeneous products
Which of the following is not an approach of measuring GDP? Intermediate product approach
Which of the following is not an explicit cost? the value of the producer own time
Which of the following is not correct? NDP at factor cost = GDP at factor cost plus Depreciation

Unrestricted

Which of the following is true about inflation?
Which of the following is true concerning the relationship
between marginal propensity to consume and the
consumption function?
Which of the following market situations explains marginal
costs equal to price for attaining equilibrium?
Which of the following might be considered the most
expansionary set of fiscal policies?
Which of the following situation does not lead to an increase
in equilibrium price?
Which of the following statement about an economic model is
not true?
Which of the following statement deals with debts and claims
of a country?
Which of the following statement is correct?
Which of the following statement is incorrect?
Which of the following statements about markets is not true?
Which of the following statements about price elasticity of
demand is not true?
Which of the following would cause a downward movement
along the money demand curve?
Who has developed kinked demand curve model under
oligopoly?
Who has sought to measure consumer surplus with the help
of indifference curve?
Who sets the price of the product under perfect competition?
With which market form, €˜Excess capacity€™ is associated?
Unrestricted
Those who have borrowed money at an interest rate below
the rate of inflation will generally benefit.
The larger the MPC, the steeper the consumption function
Perfect competition
increase in government purchases, decrease in taxes, and
increase in transfer payments
An increase in supply accompanied by a decrease in demand
Always has a mathematical foundation
Balance of capital account
Crowding out means large volumes of government borrowing,
making it difficult for individuals and small companies to
obtain loans.
Households produce goods and services
All markets provide the same amounts of information.
Higher the proportion of consumer budget on the good, lower
the value of price elasticity.
a decrease in the interest rate
Paul M Sweezy
J.R.Hicks
Buyers and sellers both
Monopolistic competition
Question - 1/60
In economics market refers to

Answer Choices

physical places, such as supermarkets, department stores, shopping malls etc.

any mechanisms by which buyers and sellers communicate to exchange goods and services

Both option 1 and option 2

only product market and not to resource market

Question - 2/60
An increase in price from 25 paisa to 30 paisa leads to an increase in the quantity supplied from
40 units to 44 units. The price elasticity of supply is:

Answer Choices

0.5

-2

-0.5

Question - 3/60
Statement A: The division of tax burden depends on elasticities of demand and supply. Statement
B: More inelastic the demand curve and more elastic the supply curve, the larger is the burden on
consumer.

Answer Choices

Both statement A and statement B are true.

Both statement A and statement B are false

Statement A is true but statement B is false.

Statement A is false but statement B is true.

Unrestricted
Question - 4/60
Which of the following can increase real GDP per person?

Answer Choices

a decrease in population growth

foreign investment from abroad

policies to encourage international trade

All the options are correct.

Question - 5/60
A rational person who currently subscribes two magazines is trying to decide whether he should
subscribe to a third. What should determine his decision?

Answer Choices

The total cost of the three magazines compared to the total satisfaction the individual would
receive.
The total amount of satisfaction the person would get from the magazines.
The additional cost of the third magazine compared to the additional benefit the person
would get from the third magazine.
The cost of the third magazine, including the time it takes to read it.

Question - 6/60
Elasticity of production is

Answer Choices

percentage change in variable input due to percentage change in output.

percentage change in output due to percentage change in variable input.

percentage change in output due to percentage change in price.

Proportionate change in quantity demanded as a result of proportionate change in price of the
product.

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Question - 7/60
Golden rule of profit maximization says that a profit maximizing firm produces

Answer Choices

where marginal revenue equals marginal cost, provided marginal cost cuts marginal revenue
from above.
where marginal revenue equals marginal cost, provided marginal cost cuts marginal
revenue from below.
where average revenue equals average cost, provided average cost cuts average revenue from
below.
where average revenue equals average cost, provided average cost cuts average revenue from
above.

Question - 8/60
A typical demand curve can not be

Answer Choices

a straight line

rising upward to right

concave from below

convex from below

Question - 9/60
Markets reduce transactions costs

Answer Choices

because each market uses the same set of rules for buying and selling goods and services
when prices are set by the sellers and are not determined by negotiation between the buyers and
the sellers
by decreasing the time spent searching for information about goods and services

only when the government can coordinate the plans of many buyers and sellers

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Question - 10/60
Expansion and contraction of demand mean

Answer Choices

Movement to a higher demand curve.

Movement to a lower demand curve

Movements along the same demand
curve
All of these

Question - 11/60
Firms under perfect competition in the short run can earn only

Answer Choices

Economic Profit

Normal profit

Loss

All of these

Question - 12/60
In 2013, Mr. X earned a salary of Rs. 25,000 and he spent Rs. 24,000, thus saving Rs.1000. At
the end of the year, he received a bonus of Rs.1000 and he spent Rs.500 of it, saving the other
Rs. 500. What was his marginal propensity to consume?

Answer Choices

0.96

0.5

0.04

0.02

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Question - 13/60
Along a demand curve real income is assumed to be constant.

Answer Choices

always true

always false

sometimes true sometimes false

None of these

Question - 14/60
If capital inputs are measured along the vertical axis and labour inputs are measured along the
vertical axis then upper ridge line denotes

Answer Choices

the points where marginal product of capital is zero

the points where marginal product of capital is one.

the points where marginal product of labour is zero

the points where marginal product of labour is one

Question - 15/60
Automatic stabilisers act to __________ government expenditures and __________ government
revenues during recessions.

Answer Choices

decrease; increase

increase; increase

decrease; decrease

increase; decrease

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Question - 16/60
The money demand curve slopes downward because

Answer Choices

the lower the interest rate, the higher the opportunity cost of holding money
the higher the interest rate, the lower the opportunity cost of holding money result of
price increases
the lower the interest rate, the lower the opportunity cost of holding money

None of these

Question - 17/60
In the second stage of short run production

Answer Choices

elasticity of production is greater than one.

elasticity of production is less than one but greater than zero.

elasticity of production is greater than one but less than infinity.

elasticity of production is less than zero.

Question - 18/60
Statement A: an increase in the price of pizza, other things constant, increases the opportunity
cost of pizza.
Statement B: Because of higher opportunity cost of pizza consumers will reduce demand for
other goods and increase the quantity demanded of pizza

Answer Choices

Both statement A and statement B are correct. And statement B is the right explanation of
statement A
Both statement A and statement B are correct. But statement B is not the right explanation of
statement A
Statement A is correct but statement B is not correct.

Statement A is not correct but statement B is correct.

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Question - 19/60
The steeper the short-run aggregate supply curve,

Answer Choices

the impact a shift of the aggregate demand curve will be more on real GDP and less on the price
level.
the impact a shift of the aggregate demand curve will be less on nominal GDP and more on the
price level.
the impact a shift of the aggregate demand curve will be less on real GDP and more on
the price level.
None of these

Question - 20/60
In economics

Answer Choices

expected total benefit and expected total costs are compared to make a choice

expected average benefit and expected average costs are compared to make a choice

expected marginal benefit and expected marginal costs are compared to make a choice
affordability of the product and availability of the product are taken into account to make a
choice

Question - 21/60
In which of the following industries do firms set prices?

Answer Choices

competitive markets, but not monopoly markets

monopoly markets, but not competitive markets

competitive and monopoly markets

neither competitive nor monopoly markets

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Question - 22/60
Green GDP means

Answer Choices

Measuring the impact of production on air pollution, water pollution, soil depletion, and
the loss of other natural resources.
Measuring the value of all green vegetables and forest products.

GDP of a country express in terms of USD dollar also known as green bucks informally.
Measuring GDP ignoring the impact of production on air pollution, water pollution, soil depletion,
and the loss of other natural resources.

Question - 23/60
Macroeconomics is the study of

Answer Choices

market regulation.

money and financial markets.

economy-wide phenomena.

how households and firms make decisions and how they interact.

Question - 24/60
If the GDP price index is 150 and nominal GDP is Rs.9,000 billion, then real GDP is

Answer Choices

Rs.135 billion.

Rs. 1,350 billion.

Rs. 600 billion.

Rs. 6,000 billion.

Question - 25/60
The price elasticity of supply is +4. The price increases by 15%. Sales were originally 200 units.

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What will they be now?

Answer Choices

80 units

320 units

60 units

120 units

Question - 26/60
MC = MR and MR = AR means

Answer Choices

The equilibrium position of a firm in the long period

The equilibrium position of a firm under imperfect competition

The equilibrium position of a firm under perfect competition

None of these

Question - 27/60
Discretionary Fiscal Policy differs from automatic stablizer Fiscal Policy in the sense that

Answer Choices

The former deals with government spending and the latter deals with tax policy

The former is chosen by Congress while the latter is chosen by the President

The former is always stabilizing, while the latter is never stabilizing

The former often takes years to enact, while the latter takes effect automatically

Question - 28/60
If the income elasticity of a good is greater than one but less than zero then a) it is a normal
good. b) it is a necessary good. c) it is an inferior good.

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Answer Choices

Only (a) is right.

Both (a) and (b) are right.

Both (b) and (c) are right.

All of these are right

Question - 29/60
Statement A: A higher Herfindahl index value signifies increase in competition along with
increasing market power. Statement B: The Herfindahl index is considered to be ratio as it takes
all the firms into account.advantageous compared to concentration

Answer Choices

Only statement A is true.

Only statement B is true

Both statement A and statement B are true

Both statement A and statement B are false

Question - 30/60
For a given price level aggregate demand curve shifts if there is change in (a)government
expenditure (b)investment expenditure

Answer Choices

Only (a)

Only (b)

Both (a) and (b)

None of these but change in consumption expenditure

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Question - 31/60
Marginal utility curve of a consumer is also his

Answer Choices

supply curve

demand curve

total utility curve

none of these

Question - 32/60
Statement A: The price elasticity of demand varies along a downward sloping linear demand
curve. Statement B: This is because the slope of a linear demand curve changes from point to
point.

Answer Choices

Both statement A and statement B are correct. And statement B is the right explanation for
statement A.
Both statement A and statement B are correct. But statement B is not the right explanation of
statement A
Statement A is correct but statement B is not correct.

Statement A is not correct but statement B is correct.

Question - 33/60
In the long run zero substitutability between the factor inputs is a feature of

Answer Choices

linear isoquant

Input output isoquant

Smooth convex isoquant

Kinked isoquant

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Question - 34/60
If (MUx / Px) > (MUy / Py) then

Answer Choices

the consumer will increase his consumption of X and decrease his consumption of Y.

the consumer will decrease his consumption of X and increase his consumption of Y.

the consumer will increase his consumption of both X and Y.

the consumer will decrease his consumption of both X and Y.

Question - 35/60
If marginal utility is zero:

Answer Choices

Total utility is zero

An additional unit of consumption will decrease total utility

An additional unit of consumption will increase total utility

Total utility is maximized

Question - 36/60
At any given price level which of the following is not going to increase real GDP demanded

Answer Choices

an increase in transfer payments

an increase in net taxes

an increase in government purchases

All of these.

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Question - 37/60
Statement A: Firms in monopolistic competition are not producing at minimum average cost.
Statement B: Firms in monopolistic competition have excess capacity

Answer Choices

Only statement A is true.

Only statement B is true

Both statement A and statement B are true

Both statement A and statement B are false

Question - 38/60
The price elasticity of demand is the

Answer Choices

Ratio of the percentage change in price to the percentage change in quantity demanded.

Ratio of the change in price to the change in quantity demanded.

Ratio of the percentage change in quantity demanded to the percentage change in
price.
Ratio of the percentage change in quantity demanded to the percentage change in price of
related good.

Question - 39/60
If Average cost (AC) is falling then

Answer Choices

marginal Cost (MC) less than Average Cost (AC)

marginal Cost (MC) equal to Average Cost (AC)

marginal Cost (MC) greater than Average Cost (AC)

the slope of Average Cost (AC) is increasing.

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Question - 40/60
When the price of a normal good falls, more of it is purchased because of

Answer Choices

The substitution effects

The income effects

Either the Substitution effect or the income effect

Both Substitution effect and income effect

Question - 41/60
If an increase in the price of product X shifts the demand for product Y rightward and,
conversely, if a decrease in the price of X shifts demand for Y leftward then

Answer Choices

X and Y are substitute products

X and Y are complementary products

X and Y are not related

X and Y both are inferior products

Question - 42/60
The Lerner index is defined as

Answer Choices

(price - cost)/cost

(cost - price)/price

(cost - price)/ cost

(price - cost)/price

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Question - 43/60
A firm practising price discrimination will be

Answer Choices

Charging different prices for different qualities of product

Buying in the cheapest and selling in the dearest market.

Charging different prices in different markets of a product

Buying only from firms selling at a discount

Question - 44/60
A monopolist has no supply curve because

Answer Choices

monopolists have no marginal cost curve

monopolists can charge any price they want

as demand changes, each output level can be consistent with more than one profit-
maximizing price
as demand changes, the firm's profit-maximizing choice of output may change

Question - 45/60
Which of the following is least likely a feature that monopolistic competition and perfect
competition have in common?

Answer Choices

Output occurs where MR = MC

Zero economic profit in the long run

Extensive advertising to differentiate products

Large number of buyers and sellers

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Question - 46/60
Average product remains positive (a)as long as total product is positive. (b)as long as marginal
product is positive.

Answer Choices

Both (a) and (b) are correct.

Only (a) is correct.

Only (b) is correct.

Both (a) and (b) are false.

Question - 47/60
A perfectly competitive firm producing 100 units of output per period fnds that: Average total
cost is $20; Average variable cost is $12; Marginal cost is $18 and increasing; Price of the
product is $15. This firm should

Answer Choices

produce more output

reduce production without shutting down

shut down (reduce output to zero)

do nothing (it is currently maximizing pro?t)

Question - 48/60
Statement A: Money income is the amount of rupees received per period. Statement B: Change
in price level keeps the money income constant but may increase or decrease the real income.

Answer Choices

Both statement A and statement B are correct.

Both statement A and statement B are false.

Statement A is correct but statement B is not correct.

Statement A is not correct but statement B is correct.

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Question - 49/60
Upward or downward shift of the demand curve shows

Answer Choices

change in quantity demanded

change in price

change in supply

both change in quantity demanded and change in price

Question - 50/60
A person finds Rs.2000 on the street. If he decides to use the money to go to an IPL match, his
opportunity cost of going to the game is

Answer Choices

nothing, because you found the money on the street.

Rs.2000 as he could have used the money to buy other things plus the value of his time spent at
the game.
Rs.2000 as he could have used the money to buy other things plus the value of his time
spent at the game. Plus the cost of snacks he purchased at the game.
Rs. 2000 because he could have used the money to buy other things.

Question - 51/60
In perfect competition there is large number of sellers.

Answer Choices

Large number of sellers means at least 1000 sellers in the market.

Large number of sellers means infinite number of sellers in the market.

Large number of sellers means every seller is selling a small amount in relative sense.

Large number of sellers means every seller is selling a small amount in absolute sense.

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Question - 52/60
When GDP increases budget deficit

Answer Choices

decreases

increases

remains constant

none of these

Question - 53/60
(a) Economic information is usually scarce and costly to acquire.
(b) Economic information is usually not required for rational decision making.

Answer Choices

Both statement (a) and (b) are true.

Both statement (a) and (b) are false.

Statement(a) is true but statement (b) is false.

Statement(a) is false but statement (b) is true.

Question - 54/60
Opportunity cost is

Answer Choices

the additional benefit of buying an additional unit of a product.

that which we forgo, or give up, when we make a choice or a decision.

the cost incurred in the past before we make a decision about what to do in the future.

a cost that cannot be avoided, regardless of what is done in the future

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Question - 55/60
If marginal benefit is greater than marginal cost for an activity, a rational choice involves:

Answer Choices

no more of the activity.

more or less, depending on the benefits of other activities.

less of the activity.

more of the activity

Question - 56/60
An Indian company owns a fast-food store in Sri lanka. The value of the goods and services
produced in the store are Included

Answer Choices

In both Sri lanka?s GDP and India?s GDP.

In Sri lanka?s GDP, but not in India?s GDP.

In India?s GDP, but not in Sri lanka?s GDP.

Partly in Sri lanka?s GDP and partly in India?s GDP.

Question - 57/60
What effect is working when the price of pizza falls and consumers tend to buy it instead ofother
goods?

Answer Choices

the income effect.

the diminishing marginal utility effect.

the substitution effect.

the ceteris paribus effect.

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Question - 58/60
In the context of circular flow of income and expenditure which of the following statements is
not correct?

Answer Choices

Firms sell factors of production to households

Households buy goods and services from business firms

Firms buy factors of production from households

The government taxes households and firms

Question - 59/60
In economics rational self interest means

Answer Choices

blind materialism, pure selfishness, or

greed.
individuals try to mimimize the expected benefit achieved with a given cost

individuals try to maximize the expected cost of achieving a given benefit.

individuals try to maximize the expected benefit achieved with a given cost or to
minimize the expected cost of achieving a given bene?t.

Question - 60/60
Marginal product is

Answer Choices

the produce when all factor inputs are employed at optimum efficiency

annual output of the most efficient firm

the extra output obtained from employing an additional unit of a factor

None of these

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