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. 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. 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. 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. 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.
28. 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.
29. 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.
30. 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.
