Economics Questions (MCQs) for Competitive Examinations
Economics Multiple Choice Questions (MCQs) for General Studies and GK preparation of SSC, NDA, CDS, UPSC, UPPSC and State PSC Examinations.
21. Which among the following is correct regarding the supply curve?
[A] It is relation between price of good and quantity produced
[B] It is a negatively sloped curve
[C] It is relation between price and quantity supplied
[D] None of the above
Show Answer
Correct Answer: C [It is relation between price and quantity supplied ]
Notes:
The supply curve reflects the relationship between the price and quantity supplied graphically. It is a positively sloped curve. It becomes flatter in the long run as price becomes constant after a certain time.
22. What is marginal utilty in economics signify?
[A] Small utlity
[B] Additional utlity
[C] Minimum utility
[D] Satisfied utilty
Show Answer
Correct Answer: B [Additional utlity]
Notes:
Marginal Utility is the additional utility derived from the consumption of an additional unit of commodity. It quantifies the added satisfaction that a consumer garners from consuming additional units of goods or services.
23. In which of the following circumstances, the total utility is maximum?
[A] Marginal utility is maximum
[B] Marginal utility = 0
[C] Marginal utility is minimum
[D] None of the above
Show Answer
Correct Answer: B [Marginal utility = 0]
Notes:
Total Utility is the sum of all the utilities derived from the consumption of all the units of a particular commodity. So when the marginal utility decreases total utility increases and is maximum when marginal utility is 0.
24. Which among the following best describes scarcity in economics?
[A] Low demand for good
[B] High demand and less supply of good
[C] Low demand as people don’t want to consume it
[D] Goods available are not free
Show Answer
Correct Answer: D [Goods available are not free]
Notes:
Scarcity means limited goods are for more number of people. In an Economy the resources are scarce and the wants are unlimited.
25. Which among the following is best described as opportunity cost?
[A] Difference between the return on chosen option and the return on best forgone option
[B] Difference between two chosen options
[C] Difference between the return this year and the previous year
[D] None of the above
Show Answer
Correct Answer: A [Difference between the return on chosen option and the return on best forgone option]
Notes:
Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another. It is the “cost” incurred by not enjoying the benefit associated with the best alternative choice.
26. Which of the following is not an essential condition for perfect competition?
[A] Homogeneous products
[B] Many sellers and buyers
[C] Freedom of entry and exit
[D] None of the above
Show Answer
Correct Answer: D [None of the above]
Notes:
The essential conditions for perfect competition in a market are :
1. homogeneous products
2. many sellers and buyers
3. freedom of entry and exit
4. firms are price takers and not price makers
27. When does a monopoly by a specific business entity occur in the market?
[A] When there are numerous buyers and sellers
[B] When homogeneous products flood the market
[C] When a distinctive product is exclusively sold by a single seller
[D] When firms are merely price takers
Show Answer
Correct Answer: C [When a distinctive product is exclusively sold by a single seller]
Notes:
A monopoly exists when a specific entity is the sole supplier of a particular commodity. This market condition can only occur if the unique product is exclusively sold by one seller, eliminating any form of direct competition. It is regulated by certain laws to prevent marketplace inefficiency. However, a monopoly can lead to innovation as other companies strive to create an alternative or similar product.
28. What is Market equilibrium?
[A] Quantity demanded greater than quantity supplied
[B] Quantity demanded less than quantity supplied
[C] Quantity demanded equal to quantity supplied
[D] Quantity demanded is same as quantity produced
Show Answer
Correct Answer: C [Quantity demanded equal to quantity supplied]
Notes:
Market equilibrium is defined by equality between quantity demanded and quantity supplied in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market.
29. Which of the following is a fixed cost for a firm?
[A] Land
[B] Labour
[C] both a and b
[D] None
Show Answer
Correct Answer: A [Land]
Notes:
Fixed cost is the Expenditure on hiring/purchasing of fixed inputs which is land. Whereas labor is variable cost as the input is variable with time. The other costs available are Explicit and Implicit cost.
30. Which of the following is correct for economic efficiency?
[A] Increase in economic acitivty in an economy
[B] Use of resources to maximize the production of goods and services
[C] Distribution of economic resources in fair and equitable manner
[D] Maximum usage of resources for maximum production of goods
Show Answer
Correct Answer: B [Use of resources to maximize the production of goods and services]
Notes:
Economic Efficiency is the use of resources so as to maximize the production of goods and services. Resources are scarce and there are unlimited wants so economic efficiency is key in development.
