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. What restricts the spending of a person in a market?
[A] Marginal Utility
[B] Purchasing power
[C] Demand curve
[D] None of the above
Show Answer
Correct Answer: B [Purchasing power]
Notes:
The purchasing power of a person is the reason for his limited spending. He has budget constraints which inturn affect the market as a whole. The budget constraint is used to analyze consumers choices.
22. Which among the following best describes scarcity in economics?
[A] Low demand for a good
[B] High demand and less supply of a good
[C] Low demand as people do not want to consume it
[D] Resources are limited relative to unlimited wants
Show Answer
Correct Answer: D [Resources are limited relative to unlimited wants]
Notes:
Scarcity in economics means that resources are limited, while human wants are unlimited. It is not the same as low demand or a temporary shortage. Because of scarcity, people and economies must make choices about how to allocate scarce resources among competing uses.
23. What is a free good?
[A] Opportunity cost = Maximum
[B] Opportunity cost = Negative
[C] Opportunity cost = 0
[D] A good which is freely available to all
Show Answer
Correct Answer: C [Opportunity cost = 0]
Notes:
A free good is a good with zero opportunity cost. This means it can be consumed in as much quantity as needed without reducing its availability to others. For Example sunlight, ideas, music or air.
24. 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
25. 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.
26. 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.
27. 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.
28. Which among the following is part of Macroeconomics?
[A] Investment of households
[B] Wages of a person
[C] How to produce good
[D] Aggregate economic activity
Show Answer
Correct Answer: D [Aggregate economic activity]
Notes:
Macroeconomics is a branch of economics that studies how an overall economy the market systems that operate on a large scale behaves. It deals with the performance, structure, behavior, and decision-making of an economy as a whole. Its features are Employment, national income, poverty etc.
29. Which of the following are correct for Real GDP?
[A] Current year production valued at current prices
[B] Current year production valued at base year
[C] Current year production valued at last year prices
[D] Current year production valued at forecasted prices
Show Answer
Correct Answer: B [Current year production valued at base year]
Notes:
Real GDP refers to current year production of goods and services valued at base year prices. Real GDP is corrected for inflation. The current base year for calculation for GDP is 2011-12.
30. What is the aggregate of the gross balances of primary income of all resident institutional units knows as?
[A] Gross domestic Product
[B] Gross national product
[C] Gross National income
[D] Net national product
Show Answer
Correct Answer: C [Gross National income]
Notes:
Gross National Income is the aggregate value of the gross balances of the primary income of all resident institutional units.
