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 related to the demand curve?
[A] Relation between quantity demanded and price of a commodity
[B] Relation between supply and demand of a commodity
[C] Relation between income of customer and demand of commodity
[D] None of the above
Show Answer
Correct Answer: A [Relation between quantity demanded and price of a commodity]
Notes:
The demand curve is the graphical representation of the relationship between the quantity demanded of a commodity and its prices. It is downward sloping from left to right because of the law of diminishing marginal utility, income effect, and price effect.
22. What does low price elasticity of demand for a commodity show?
[A] Necessity of good
[B] It is luxury good
[C] It doesn’t have importance
[D] It is inferior good
Show Answer
Correct Answer: A [Necessity of good]
Notes:
Price Elasticity is the measure of the degree of responsiveness of demand for a commodity to change in its price. That means the low price elasticity is demand doesn’t change with the price. These are the necessary goods.
23. 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.
24. Which of the following is the basis for the law of demand?
[A] Diminishing marginal utility
[B] Demand and supply relation
[C] Total utility of a good
[D] None of the above
Show Answer
Correct Answer: A [Diminishing marginal utility]
Notes:
The law of demand which states that quantity demanded of a commodity is inversely related to the price of a commodity the demand of good and the price. This is based on the law of diminishing marginal utility. This is because Marginal utility affects the demand of the good.
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 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. 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.
28. What does Public sector in an economy means?
[A] That which is owned by community
[B] That which is owned by public
[C] That which is owned by government
[D] Both a and b
Show Answer
Correct Answer: C [That which is owned by government]
Notes:
The Public Sector in an economy is that which are owned and operated by the government and exist to provide services for its citizens. They are government-owned and government-controlled and doest exist to generate profits.
29. What is the extra cost imposed by the government which increase the price for a customer is known as?
[A] Subsidy
[B] Tax
[C] Inflation
[D] Fine
Show Answer
Correct Answer: B [Tax]
Notes:
Tax is the cost imposed by the government over goods and services in an economy to generate revenue for the government for its expenditure. This includes capital as well as revenue expenditure.
30. Which among the following is not a part of factor of production?
[A] Land
[B] Labour
[C] Capital
[D] Wages
Show Answer
Correct Answer: D [Wages]
Notes:
The Factors of production are the inputs available to supply goods and services in an economy.
They are Land, Labour, Capital and Enterprise.
