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 an example of substitute goods?
[A] Milk and Coffee
[B] Pen and Paper
[C] Ink and Pen
[D] Tea and coffee
Show Answer
Correct Answer: D [Tea and coffee]
Notes:
Substitution Effect refers to the substitution of the commodity in place of other commodity when it becomes relatively cheaper. In the given question if the price of Coffee increases, Tea can replace it.
22. Which among the following is related to utility?
[A] Satisfaction and wants
[B] Necessity and wants
[C] Usefulness and need
[D] None of the above
Show Answer
Correct Answer: A [Satisfaction and wants]
Notes:
Utility is the power or capacity of a commodity to satisfy a human want or it is the amount of satisfaction that a person gets from the consumption of a good or service. It is measured in utils.
23. 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.
24. 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.
25. 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.
26. 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.
27. 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.
28. 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
29. What defines a market place in an economy?
[A] Place where profits are made
[B] Place where goods are made
[C] Place where people meet
[D] Place where buyers meet sellers
Show Answer
Correct Answer: D [Place where buyers meet sellers]
Notes:
A market is a place where forces of demand and supply operate and where buyers and sellers interact to trade goods, services, or contracts or instruments for money or barter.
30. Who among the following receives subsidies from the government?
[A] Sellers
[B] Buyers
[C] Manufacturers
[D] All of the above
Show Answer
Correct Answer: D [All of the above]
Notes:
Subsidy a negative tax when the government gives money to reduce the price. A seller receives a subsidy to reduce the price for consumers. A manufacturer receives a subsidy for inputs incurred by them. A buyer sometimes receives a direct subsidy on important essentials like gas.
