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.
41. In terms of micro-economics, comparative advantage is based on which of the following?
[A] dollar price
[B] labor cost
[C] opportunity cost
[D] capital cost
Show Answer
Correct Answer: C [opportunity cost]
Notes:
Opportunity cost is the potential benefits that an investor, individual ora business misses due to choosing an alternate option. It is the forgone benefit.
42. In which of the following conditions, the domestic price a product will be equal to the world price in a country?
[A] trade restrictions are imposed on the product in that country
[B] the country chooses to import, but not export, the product
[C] the country chooses to export, but not import, the product
[D] the country allows free trade
Show Answer
Correct Answer: D [the country allows free trade]
Notes:
When a country allows free trade then the domestic price will be equal to the price elsewhere in the world. This is called a trade regime with no restrictions. In rest of the places, the prices will not be equal.
43. What kind of the cost is emplying a lawyer to seek help in getting a contract drafted and enforced between two parties?
[A] opportunity cost
[B] implicit cost
[C] sunk cost
[D] transaction cost
Show Answer
Correct Answer: D [transaction cost]
Notes:
Transaction cost is the cost incurred when buying or selling goods or services. It represents the costs that do not have returns. The fee of lawyers come under this.
44. Which of the following is not a micro-economic variable?
[A] Demand of a commodity
[B] Supply of a commodity
[C] Price rise of a commodity
[D] Employment generated in a year in a country
Show Answer
Correct Answer: D [Employment generated in a year in a country]
Notes:
Examples of micro economic variables are: (i) Demand of a commodity (ii) Supply of a commodity, (iii) Price determination of a commodity etc.
45. Which term is used to describe the want satisfying power of a commodity or a service?
[A] Demand
[B] Want
[C] Utility
[D] Consumption
Show Answer
Correct Answer: C [Utility]
Notes:
Utility is the want satisfying power of a commodity or a service. Law of diminishing marginal utility states that as a consumer consumes more and more units of a commodity, marginal utility derived from successive units goes on fa lling.
46. What is the total output changes due to changes in all inputs in the same proportion is called as?
[A] Law of Diminishing marginal returns
[B] Law of Increasing output
[C] Law of Returns of Scale
[D] Law of constant returns
Show Answer
Correct Answer: C [Law of Returns of Scale]
Notes:
The way total output changes due to change in all inputs in the same proportion is known as “law of return to scale”.
47. Which curve direction is an exception to the law of demand?
[A] Downward to the right
[B] Upward to the right
[C] Downward to the left
[D] Upward to the left
Show Answer
Correct Answer: B [Upward to the right]
Notes:
The law of demand states demand falls as price rises, shown by a downward-sloping curve. However, for Giffen or Veblen goods, demand curve may slope upward to the right, reflecting increased demand at higher prices, making it an exception to the general law of demand.
48. Which of the following is a fixed cost to a manufacturing firm in short-run?
[A] Insurance on buildings
[B] Overtime payment to worker
[C] Cost of energy
[D] Cost of Raw Material
Show Answer
Correct Answer: A [Insurance on buildings]
Notes:
In the short run insurance premium are fixed costs because they are independent of the level of production.
49. Which of the following is a “Public Good”?
[A] A Commodity that is popular among general public
[B] A scheme that benefits the poor
[C] A commodity that is produced by Government
[D] A Commodity whose benefits are indivisibly spread among the entire community
Show Answer
Correct Answer: D [A Commodity whose benefits are indivisibly spread among the entire community]
Notes:
“Public Good” is a Commodity whose benefits are indivisibly spread among the entire community.
50. An increase in the consumer income leads to a decrease in demand of which type of good?
[A] normal good
[B] complementary good
[C] inferior good
[D] substitute good
Show Answer
Correct Answer: C [inferior good]
Notes:
An inferior good is a good whose demand decreases when consumer income rises, unlike normal goods, for which the opposite is observed. Normal goods are those goods for which the demand rises as consumer income rises.
