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. Which among the following is correct regarding gross capital formation(GCF)?
1. High GCF high savings in the economy
2. It includes capital formation in the public sector too
3. It is the Percentage of investment out of total GDP
Choose the correct option from the code given below:
[A] 1 only
[B] 1 and 2 only
[C] 2 only
[D] 1,2 and 3
Show Answer
Correct Answer: D [1,2 and 3]
Notes:
Gross capital formation (GCF) – The percentage of the investment made each year out of the total GDP is called Gross Capital Formation. High GCF denotes higher rate of savings in the economy which is required for high rate of production, capital formation, changes in production techniques.GCF includes capital formation in public sector, private sector, and also household sector.
42. 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.
43. 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.
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 if the following is subject matter of microeconomic study?
[A] Study of Cotton Textile Industry
[B] General Price level of commodities
[C] Problem of unemployment
[D] Aggregate demand of the commodities
Show Answer
Correct Answer: A [Study of Cotton Textile Industry]
Notes:
Price determination of a commodity is a subject matter of microeconomics. The study’of cotton textile industry is also a micro economic study. Study of general price level is a macro economic study. The study of the problem of the unemployment is considered a macro economic study because this problem is concerned with the Indian economy in totality.
46. Which of the following factors affects the demand for a commodity?
[A] Price of commodity
[B] Quantity supplied by producers
[C] Nature of production technology
[D] Cost of distribution
Show Answer
Correct Answer: A [Price of commodity]
Notes:
Demand for a commodity is directly affected by its own price, along with factors like consumer income, tastes and preferences, and prices of related goods. Quantity supplied, production technology, and distribution cost are not determinants of demand in the basic demand theory context.
47. When the price of a substitute of a commodity X falls, then the demand for X will?
[A] Increase
[B] Decrease
[C] Increase, then decrease
[D] Decrease, then increase
Show Answer
Correct Answer: B [Decrease]
Notes:Substitute goods are products that can replace each other in consumption (such as tea and coffee).
When the price of a substitute good falls, consumers naturally switch to buying the cheaper substitute. As a result, the demand for commodity X decreases, shifting its demand curve to the left.
48. 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”.
49. What is the income elasticity of demand for inferior goods?
[A] equal to 1
[B] greater than 1
[C] less than 0
[D] greater than 0
Show Answer
Correct Answer: C [less than 0 ]
Notes:
Inferior goods have a negative(less than 0) income elasticity of demand meaning that demand falls as income rises. Inferior goods demand drops when the income of people drops.
50. Which among the following is a factor of production?
[A] Land
[B] Rent
[C] Profits
[D] Interest
Show Answer
Correct Answer: A [Land]
Notes:
The factor of production are Land, Labour, Capital , Entrepreneurship.The payments made to the factors of production (rents, wages, interest, and profits).
