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. 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.
24. 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.
25. 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.
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. 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.
30. 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.
