Comprehension Test : Mcqs

COMPREHENSION TEST : MCQS-

[ INTRODUCTORY MICROECONOMICS]

Unit – 1: Introduction

Select the correct answer of the following questions:

Which of the following is not concerned with the problem of choice ?

(a)Excessive income (b) Alternative use of resources

2. Example of micro economic variable is:

(a) wholesale price index(b) national income

3.Who controls economic activities under centrally planned economics ?

(a) Industrialists (b) Private firms

4.Slope of production curve is:

(a) a straight line (b) convex to the point of origin ‘O’

5.The problem of ‘what to produce’ relates to:

(a) the choice of technique (b) distribution of income

6. In the diagram alongside, Inefficient use of Resources is shown by:

(a) Points ‘A’ and ‘B’

(b)Points ‘D’

(d) Points ‘C’ and ‘D’

7. Increase (growth) of resources implies that production possibility curve :

(a) shifts to the Right (b) Shifts to the left

8. In the diagram alongside OP is the production possibility curve (PPC). Original opportunity cost at point ‘a’is :

(a) ab/bc

(b) bc/ab

(d) none of these

9. The following table show the production of cricket bats and sarres of an imaginary economy :

Production of Cricket Bats (thousand) / 0 / 1 / 2 / 3 / 4 / 5
Production of Sarees (in lal) / 75 / 70 / 62 / 50 / 30 / 0

If the production of cricket bats is increased from 3 thousand to 4 thousand, how much production of sarees will he to be sacrificed by the economy ?

(a)Zero(b) 8 lakh sarees

UNIT – 2 Consumer’s Equilibrium and Demand

Select the correct answer of the following questions:

What satisfying power of commodity is called :

(a)Consumption (b) utility

2. Consuming two goods, consumer attains equilibrium when :

(a) MU1 > MU2(b) MU 2> MU1

3.When marginal utility is negative, total utility is :
(a) zero(b) diminishing

4. Law of Diminishing Marginal Utility states that when more and more units of a commodity ate consumed, marginal utility:

(a) begins to increase (b) remains constant

5. When total utility is maximum, marginal utility becomes :

(a) unity(b) negative

6. If the consumer consume only one commodity ‘X’ he will be in equilibrium when :

(a) MUxPx(b) MUx= Px

[Here, MUx= Marginal utility of the good X (in terms of money); Px= Price of good –X]

7.What will be the condition of total utility when marginal utility stays positive ?

(a) Maximum (b) Diminishing

8. When TU is increasing at a diminishing rate, MU must be :

(a) Increasing (b) decreasing

9. Marginal utility of a particular commodity at the point of saturation is :

(a) zero(b) unity

10. Which of the following equations is incorrect ?

(a) MU= TUn+2 – TUn+1(b) MU= TU/Q

11. In which analysis can utility be measured in definite numbers such as 1,2,3,4 etc ?

(a) Cardinal utility analysis (b) Ordinal utility analysis

12.Diagrammatic presentation of consumer’s indifference set is called ?

(a) indifference curve (b) utility curve

13. Budget line indicates :

(a) price ratio(b) income ratio

14.Attainable combinations of X and Y are drawn on the assumption that Px and Py are

(a) Constant (b) variable

15. According to IC analysis , a consumer attains equilibrium when :

(a) MRSxy= Px/Py(b) MRSxyPx/Py

16. Given the fact that MRS between goods X and Y is diminishing ,IC is :

(a) convex to the origin (b) concave to the origin

17.An indifference curve is related to

(a) choice and preferences of the consumer (b) consumer’s income

18.The slope of indifference curves is measured by

(a) marginal rate of transformation(b) marginal rate of substitution

19.How are goods X and Y when, as a result of rise in the price of good-X , demand for good-Y increases ?

(a) Substitute goods(b) Complementary goods

20. In case of normal goods, demand curve shows :

(a) a negative slope(b) a positive slope

21.Law of demand must fall in case of :

(a) normal goods (b) giffen goods

22.Inferior goods are those whose income effect is :

`(a) negative(b) positive

23.Shift in demand curve means :

(a) fall in demand due to rise in own price of the commodity

(b) rise in demand due to fall in own price of the commodity

(d) none of these

24. Which of the following pairs represents substitute goods ?

(a) Car and petrol (b) Coffee and tea

25.In case of Giffen’s Paradox the slope of demand curve is

(a) negative(b) positive

26.As a result of rise in consumer’s income , demand curve for coarse grain (inferior good) :

(a) shifts to the left(b) shifts to the right

27.If two goods are complementary then rise in the price of one results in

(a) rise in demand for the other(b) fall in demand for the other

28.The graphic presentation of a table showing price and demand relationship for a commodity in the market is called :

(a) individual demand curve(b) producer’s demand curve

29.When there is no change in quantity demand in response to any change in price, it is a situation of :

(a) zero price elasticity (b) infinite price elasticity

30.When total expenditure increases in response to decrease in the price of the commodity the elasticity of demand is :

(a) greater than unity(b) less than unity

31.Ed> 1 represents

(a) elastic demand (b) inelastic demand

32.On all points of rectangular hyperbola demand curve, elasticity of demand is
(a) equal to unity(b) zero

33.When demand curve is parallel to X-axis, elasticity of demand is

(a) unity(b) zero

34.At the mid-point of as straight line downward sloping demand curve, elasticity of demand (Ed) is

(a) 2(b) 1/2

35. When percentage change in demand is less than percentage change in price, demand is:

(a) Perfectly inelastic(b) perfectly elastic

36. When percentage change in demand is more than percentage change in price, demand is:

(a) Inelastic(b) elastic

37. What will be the elasticity of demand (Ed) when demand curve is parallel to Y-axis?

(a) Unity(b) zero

(c)Less than unity(d) More than unity

38. If due to fall in price, total expenditure (Ed) when demand curve is parallel to Y-axis?

(a) A case of inferior good

(b) Price elasticity of demand is less than unity

(d) Price elasticity of demand is infinity

39.A consumer demands 5 units of a commodity at the price of ₨4 per unit. He demands 10 units when the price falls to Rs3 per unit. Price elasticity of demand is equal to :

(a) 3(b) 4

Price / 10 / 15
Demand / 40 / 20

40.Using total expenditure method , what is Ed when price and demand are as under :

(a)Ed=1(b) Ed<1

(c)Ed>1(d)Ed=0

Unit-3A : Producer Behaviour and Supply

Select the correct answer of the following questions:

1.Per unit production of the variable factor is called

(a) total product(b) average product

2.Which of the following equations is correct ?

(AP= Average product)

(Q= Output)

(L=Variable factor)

(MP= Marginal Product)

(a) AP=Q/L

(b) MP=Q/∆L

(c)MP= ∆Q/L

(d) none of these

3.Which of the following equations is correct ?

(a) MP= TPn-TPn-2(b) MP=AP/L

(c)MP=TP/L(d) MP=∆TP/∆L

4.Variable proportions type production function exists:

(a) when with change in the level of output there is change in factor ratio

(b) when it is possible to increase output by increasing the application of the variable factor

(d) both (a) and (b)

5. What will be the state of total output when marginal product turns negative?

(a) Total output will begin to fall(b) Total output will begin to rise

6. When average product (output) increase, marginal product is :

(a) equal to average product(b) greater than average product

7.Which one of the following leads to the law of variable proportions ?

(a) Some factors are constant

(b) Some factors are more efficient than other

(d) None of these

8.Incase of diminishing returns :

(a) total product increases at diminishing rate(b) total product increases at increasing rate

9.When more and more units of a variable factor are combined with the fixed factor, the resulting law is called :

(a) Law of variable proportions (b) Law of increasing Returns to Scale

10. What does break- even point indicate?
a) TR>TC (b) TR<TC

11. Difference between TR and TC is maximum when

a) AR=MR(b) MR=MC

12. Under perfect competition, for the producer to be in equilibrium :

a) AR=MR=AC and AC must be rising

b) AR=MR=MC and MC must be falling

c) AR=MR=MC and MC must be rising

d) AR=MR=TC and TC must be rising

13. In the context of producer’s equilibrium which one is wrong

a) Minimum difference between TR and TC

b) MR=MC

c) Producer gets maximum profit

d) Inequilibrium situation producer has no tendency to change his production.

14. MC=MR=AC=AR refers to long term equilibrium of

a) Competitive firm b) Oligopoly firm

c) Monopoly firm d) None of these

15. A firm reaches shut down point when

a) TR=TVC (b) TR=TC

c) TC = AVCd) MC=AC

16. TR>TC is a situation of

a) normal profitb) normal losses

c) abnormal profits d) abnormal losses

17. Normal profits occur when

a) AR>ACb) AR=AC

c) AR<ACd) TR>TC

18. At break-even point , a firm makes :

a) normal profitsb) extra normal profits

c) extra normal lossesd) none of these

19. Which of the following statements is correct?

a) There is difference between supply and stock

b) Supply does not depend on governments tax- policy

c) Stock refers to the quantity which comes to market for sale

d) Stock and supply are always equal

20. When supply curve is a vertical straight-line, it indicates:

a) unitary elastic supplyb) perfectly elastic supply

c)perfectly inelastic supply d) relatively elastic supply

21. If elasticity of supply is equal to unity, what will be the percentage increase in supply as a result of 15 percentrise in price of a commodity?

a) 8%b) 12%

c) 0% d) 15%

22. If 8% rise in price causes 27% increase in supply, elasticity of supply will be :

a) 1.5b) 0.5

c) 3.5d) 2.5

23. Movementalong the supply curve occurs due to :

a) Increase in own price of the commodity

b) decrease in own price of the commodity

c) facton other than own price of the commodity

d) both (a) and (b)

24. The rise in supply due to rise in price is called:

a) increase in supplyb) decrease in supply

c) extension of supplyd) none of these

25. When supply falls due to factors other than own price of the commodity, it indicates:

a) contraction in supplyb) decrease in supply

c) extension in supplyd) none of these

26. An upward sloping straight line supply curve shooting from the X- axis indicates that:

a) elasticity of supply is equal to zero

b) elasticity of supply is equal to one

c) elasticity of supply is greater than one

d) elasticity of supply is less than one

Unit – 3B: Cost and Revenue

Select be correct answer of the following questions:

1. Which one of the following is correct?

a)TC= TFC x TVCb) TC= TFC / TVC

c) TC= TFC + TVCd) T C= TFC- TVC

2. What dose shaded area show in this diagram?

a) TVCb) TFC

c) TCd) ATC

3. Average fixed cost (AFC) is indicated by:

a) rectangular hyperbolab) a straight line parallel to X- axis

c) a straight line parallel X- axisd) U- shaped curve

4. Which of the following indicates fixed cost?

a) Electricity billb) Expenses on raw material

c) Wages of daily workersd) Interest on fixed capital

5. When production is zero, total cost (TC) will be:

a) Zerob) equal to variable cost

c) equal to total fixed costd) equal to marginal cost

6. When MC curve cuts AC curse:

a) AC= MCb) AC< MC

c) AC> MCd) both AC and MC are falling

7. When production level is zero, then fixed cost is:

a) Zerob) negative

c) positived) equal to variable cost

8. The costs which do change with change in the quantity of output are called:

a) supplementary costsb) money costs

c) real costsd) none of these

9. The costs which vary as the level of output varies are called:

a) prime costs b) indirect costs

c) real costsd) none of these

10. Per unit cost of a good is called:

a) total fixed costb) variable cost

c) average costd) none of these

11. What happens to ATC when MC< ATC?

a) ATC will riseb) ATC will fall

c) ATC will remain constartd) None of these

12. Under perfect competition :

a) MR curve is below AR curveb) price = AR = MR

c) AR remains constantc) both (b) and (c)

13. Under monopoly MR can be negative only when :

a) AR is increasingb) AR is decreasing

c) AR is constantd) AR = O

14. which of the following equations is correct ?

15. When MR zero, then

a) TR is minimum b) TR is zero

c) TR is maximumd) TR is equal to MR

16. Seletion *******

a)b)

17. When TR increases at constant rate, MR should be:

a) increasingb) decreasing

c) constantd) zero

18. Which is the following statements is appropriate in case of monopoly?

a) AR curve slopes upwards while MR curve slopes downwards

b) Slope of both AR and MR curves is upwards

c) Slope of both AR and MR curves is downwards and MR curve is below AR curve

d) Slope of both AR and MR curves is downwards and MR curve is above AR curve

19. Average revenue :

a) can be negativeb) cannot be negative

c) is zero when TR is zerod) both (b) and (c)

20. what is the shape of the average revenue curve in perfect competition?

a) Horizontal straight line b) Vertical straight line

c) Rectangular hyperbolad) Downward to the right

21. Under perfect competition ‘Average Revenue’ and ‘Marginal Revenue’ are indicated by :

a) a common horizontal straight lineb) a common vertical straight line

c) a common rectangular hyperbolad) different lines sloping downward

UNIT – 4: Forms of Market and Price Determination

Under Perfect Competition with Simple Applications

Select the correct answer of the following questions:

1. In which kind of market, a firm is a price- taker?

a) Perfect Competitionb) Monopoly

c) Monopolistic competitiond) Oligopoly

2. Firm’s demand cuve under monopoly shows:

a) no relationship between price and demand

b) inverse relationship between price and demand

c) positive relationship between price and demand

d) none of these

3. Charging different prices from different buyers for the same good is called :

a)price extensionb) price contraction

c) price discriminationd) Price control

4. In the context of monopolistic competition one of the following statements is correct?

a) Firm has full control over price

b) horizontal straight line in demand curve of the firm

c) Freedom of entry and exit

d) selling costs do not exist

5. Which characteristic of monopolistic competition is compatible with monopoly?

a) One seller and large number of buyersb) Full control over price

c) Demand curve slopes downwardc) Freedom of entry and exit

6. Which market induces trusts and cartels?

a) Perfect competition b) Monopoly

c) Oligopolyd) None of them

7. If the demand curve of a firm is a horizontal straight line :

a) a firm can sell any amount at the existing price

b) a firm can sell only a specified amount at the existing price

c) all firms will sell equal amount of a commodity

d) firms can differentiate their product

8. Compared with monopolistic competition, a firm’s demand curve under monopoly is :

a) equally elastic b) less elastic

c) more elasticd) infinitely elastic

9. A market situation in which there are only two producers is called :

a) Monopolyb) Duopoly

c) Oligopolyd) none of these

10. In monopolistic competition the products are:

a) homogeneous only

b) homogeneous supported with advertisement

c) differentiated only

d) differentiated supported with advertisement

11. Under perfect competition, equilibrium price of the commodity is determined by:

a) demand for the commodity aloneb) supply of commodity alone

c) both demand and supplyd) the government

12. Supply being perfectly inelastic, what will be the effect of increase or decrease in demand on price and equilibrium quantity?

a) Price increases or decreases respectively

b) No effect on equilibrium quantity

c) Both (a) and (b)

d) None of these

13. When will increase in supply bring down the price, leaving the quantity demanded unchanged?

a) When demand for the commodity is perfectly elastic

b) When demand for the commodity is perfectly inelastic

c) When demand for the commodity is less elastic

d) When demand for the commodity is more elastic

14. What will be the effect on equilibrium price if supply is decreased without any change in demand?

a) No change in priceb) Price will fall

c) Price will rised) None of these

15. The period of time, when supply is fully adjusted to change in demand is called:

a) Short – periodb) very short- period

c) mid- periodd) long- period

16. Market supply curve of perishable goods is a vertical straight line parallel to Y- axis. It happens in which of the following periods?

a) Long- periodb) Short – period

c) very short- periodd) Market- period

17. What would price ceiling lead to when the maximum price is fixed lower than the equal price?

a) Excess demandb) Excess supply

c) Deficient demandd) Deficient supply

18. If demand for a product falls, equilibrium price will :

a) fallb) rise

c) either of the twod) neither of the two

19. The market price is related to:

a) short periodb) very short period

c) long periodd) very long period

Answers:

Unit -1

1. (a) , 2. (c), 3. (c), 4. (c), 5. (d), 6. (c), 7. (a), 8. (a), 9. (d).

Unit – 2

1. (b), 2. ( c), 3.(b), 4. (c), 5. (c), 6. (b), 7. (c), 8. (b), 9. (a), 10. (b), 11. (a), 12. (a), 13. (a), 14. (a), 15. (a), 16. (a), 17. (a), 18. (b), 19. (a), 20. (a), 21. (b),22. (a), 23. (c), 24. (b), 25. (b), 26. (a), 27. (b), 28. (c), 29. (a), 30. (a),31(a) 32. (a), 33. (a), 34. (c), 35. (d), 36. (b), 37. (b), 38. (b), 39. (b), 40. (c).

०

1. (b), 2. ( a), 3.(d), 4. (d), 5. (a), 6. (b), 7. (a), 8. (d), 9. (a), 10. (c), 11. (b), 12. (c), 13. (a), 14. (a), 15. (a), 16. (c), 17. (b), 18. (a), 19. (a), 20. (c), 21. (d),22. (a), 23. (d), 24. (c), 25. (b), 26. (d).

Unit – 3B

1. (c), 2. ( a), 3.(a), 4. (d), 5. (c), 6. (a), 7. (c), 8. (a), 9. (a), 10. (c), 11. (b), 12. (d), 13. (b), 14. (a), 15. (c), 16. (b), 17. (c), 18. (c), 19. (d), 20. (a), 21. (a).

Unit – 4

1. (a), 2. (b), 3.(c), 4. (c), 5. (c), 6. (c), 7. (a), 8. (b), 9. (b), 10. (d), 11. (c), 12. (c),

13. (b), 14. (c), 15. (d), 16. (c), 17. (a), 18. (a), 19. (b).

COMPREHENSION TEST : MCQs

(INTRODUCTORY MACROECONOMICS)

UNIT- 1 : National Income and Related Aggregates

Select the correct answer of the following question:

1. Those goods which satisfy human wants directly are called

a) intermediate goodsb) consumer goods

c) capital goodsd) none of these

2. In the production of sugar, sugarcane is

a) a final goodb) a capital good

c) an Intermediate goodd) none of these

3. Which of the following is a semi-durable goods?

a) Radiob) Clothes

c) Milkd) Petrol

4. Capital goods are those goods

a) which are used in the production process for several years

b) which are used in the production process for few years

c) Which Involve depreciation losses

d) Both (a) and (c)

5. Increase in the stock of capital is known as

a) Capital lossb) capital gain

c) Capital formationd) none of these

6. Net investment is equal to

a) Gross investment + depreciationb) gross investment – depreciation