Micro-Economics-Basics-mcq

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Complete resources on Micro Economics

Micro Economics
Multiple Choice Questions
Micro Economics – Introduction – MCQ

1. ‘Economics is the study of mankind in the ordinary business of life’ was stated by:

(a)    Adam Smith

(b)    Robbins

(c)    Alfred Marshall

(d)    Peterson

Alfred Marshall stated that “Economics is the study of mankind in the ordinary business of life”. So, option (c)is correct.

2. Who defines Economics in terms of Dynamic Growth and Development?

(a)    Peterson

(b)    Paul A Samuelson

(c)    Adam Smith

(d)    Marshall

Paul A Samuelson defined Economics in terms of Dynamic growth and development. So, option (b)is correct.

3.  Normative aspect of Economics is provided by:

(a)    Marshall

(b)    Robbins

(c)    Adam Smith

(d)    Ricardo

Normative aspect of Economics is provided by Marshall. So, option (a)is correct.

4. Microeconomics is also known as:

(a)    Productive theory

(b)    Price theory

(c)    Process theory

(d)    Consumption theory

Micro economics studies the economic behaviour of the individual unit. Micro economics deals with Price Theory, for determination of prices of individual commodities. So, option (b)is correct.

5. Which of the following is the part of micro economics?

(a)    Inflation in the economy

(b)    Problem of unemployment

(c)    National income

(d)    Income of firm

Income of firm is related to microeconomics as it is related to a particular Firm and not the whole economy. So, option (d)is correct.

6. The branch of economic theory dealing with the problem of allocation of resources is:

(a)    Micro Economics

(b)    Macro Economics

(c)    Econometrics

(d)    All of these

Micro Economics deals with the problem of allocation of resources. So, option (a)is correct.

7. Which of the following falls under micro economics?

(a)    National income

(b)    General price level

(c)    Factor pricing

(d)    National saving and investment

Micro economy deals with individual whereas Macro economy deals with economy as a whole. Factor pricing is a part of micro economics, whereas national income, general price level, national saving and investment are part of macro economics. So, option (c)is correct.

8. Which of the following is not a micro economic subject matter?

(a)    The price of mangoes

(b)    The cost of producing a fire truck for the fire department of Delhi, India.

(c)    The quantity of mangoes produced for the mangoes market

(d)    The national economy’s annual rate of growth.

Micro-economics is the study of particular firm, particular household. Individual price, wages, income, industry and a particular commodity. Hence, the national annual rate of growth is not a micro-economic subject matter (it is a subject matter of macro economics). So, option (d)is correct.

9. Price Theory is a subject of :

(a)    Micro Economics

(b)    Macro Economics

(c)    Positive economics

(d)    Social science.

Micro economics deals with price theory. So, option (a)is correct.

10. ———–deals with the problem of allocation of resources.

(a)    Social science

(b)    Macro-Economic Theory

(c)    Mathematics

(d)    Micro-Economic Theory

Micro economic theory deals with the problem of allocation of resources. So, option (d)is correct.

11. Which of the following is part of Micro-Economics?

(a)    Consumer Behaviour

(b)    External Value of Money

(c)    Employment and Economic Growth

(d)    All of the above.

Consumer Behaviour analysis is part of micro economics, where individual consumer’s behaviour is studied.

External value of money, employment and economic growth national income are part of macro economics where the economy is studied as a whole. So, option (a)is correct.

12. A study of how increase in the corporate income tax rate will affect the natural           unemployment rate is an illustration of:

(a)    Macro Economics

(b)    Econometrics

(c)    Micro Economics

(d)    Normative Economics

Effect of increase in corporate income tax rate on the natural unemployment rate is a matter of whole economy. So, it is a part of macro economics. So, option (a)is correct.

13. Macro-Economics is the study of behaviour of:

(a)    Multiple

(b)    Individual

(c)    Economy as a whole

(d)    None of the above.

Macro economics is the study of the overall conditions of an economy. So, option (c)is correct.

14. Income Theory is subject of :

(a)    Macro Economics

(b)    Micro economics

(c)    Human science

(d)    Normative economics.

Macro economics deals with income theory. So, option (a)is correct.

15. Macro Economics, we study about :

(a)    Factor Pricing

(b)    National Income and Output

(c)    Location of industry

(d)    Study of Firms.

Factor pricing, location of industry, study of firms are part of micro economics where economic behaviour of individual unit is studied. National income and output is a part of macro economics in which the economic system is studied as a whole. So, option (b)is correct.

16. The market form characterized by “competition among the few firms producing           differentiated product which are close substitutes” is known as[i1]  :

(a)    imperfect competition

(b)    monopolistic competition

(c)    pure oligopoly

(d)    differentiated oligopoly.

Differentiated oligopoly  market form  is characterized by “competition among the few firms producing differentiated product which are close substitutes” is known as differentiated oligopoly. So, option (d)is correct.

17. A capitalist economy uses ……. As the principal means of allocating resources.

(a)    Investment

(b)    Supply

(c)    Total production

(d)    Prices

A capitalist economy applies ‘prices’ as the principal way of allocating resources, because price mechanism have pivotal role in capitalist economy. So, option (d)is correct.

18. A capitalist economy uses ———- as the principal means of allocating resources:

(a)    Demand

(b)    Supply

(c)    Human wants

(d)    Price

Under capital economy, price is determined by market  force of demand and supply. Capitalist economy uses price as the principal means of allocating resources. So, option (d)is correct.

19. In a capitalist economy, when consumers increase their purchase of a goods and the level of ———– exceeds ——— then prices tend to rise:

(a)    Demand, Supply

(b)    Supply, Demand

(c)    Prices, Supply

(d)    Profits, Production

Under free market economy, when consumers increase their purchase of a gods and the level of demand exceeds supply, then price will start to increase. So, option (a)is correct.

20. Another name for capitalistic economy is

(a)    Free Market Economy

(b)    Socialist market Economy

(c)    Regulated Market Economy

(d)    Regulated Open Economy.

Free market economy is another name of Capitalist economy. So, option (a)is correct.

21. Which is the feature of capitalistic economy

(a)    Profit maximisation

(b)    Competition among Sellers & Buyers

(c)    Disparity of Incomes

(d)    All of the above.

Capitalist economy is characterized by motive of profit maximisation, competition among sellers & buyers and inequal distribution of incomes. So, option (d)is correct.

22. In which type of economy can each producer allocate his resources based on the demand.

(a)    Market economy

(b)    Socialistic economy

(c)    Mixed economy

(d)    Controlled economy.

Under market economy system, producer allocates resources based on the demand. So, option (a)is correct.

23. In which type of economy do consumers and producers make their choices based on the       market forces of demand and supply?

(a)    Open economy

(b)    Regulated economy

(c)    Socialist economy

(d)    Market economy.

In open economy system, there is lack of government control. Under this economy, consumers and producers make their choices based on the market forces of demand and supply. So, option (a)is correct.

24. In  a Free Market, the allocation or resources is determined by

(a)    Government decision

(b)    A Central Planning department

(c)    Consumer Preference

(d)    None of these.

In a free market economy, the resource allocation is determined by consumer choice. So, option (c)is correct.

25. “Consumer Sovereignty” implies

(a)    Consumer participation in manufacturing process

(b)    Consumer is the Ruler of the State

(c)    Producers produce any type of goods and dump them in the market.

(d)    Producers produce only those goods which Consumers intends to buy.

Consumer sovereignty is one of the major characteristics of capitalist economy. According to consumer sovereignty, producers produce only those goods which consumers prefer to buy. So, option (d)is correct.

26. In which type of economic system has the Government no control over price          fluctuations?

(a)    Market Economy

(b)    Socialist Economy

(c)    Mixed Economy

(d)    Controlled Economy.

Under Market Economy, government has no control on the price determination. All assets are owned by private sector price is determined with profit maximization motive. So, option (a)is correct.

27. In which type of economic system the government has no control over price fluctuations?

(a)    Market economy

(b)    Socialist economy

(c)    Mixed economy

(d)    Regulated economy

Under Market Economy, government has no control on price fixation. Price is fixed by the market force as per demand & supply of the product. So, option (a)is correct.

28. The target of an entrepreneur is to earn as much profit as possible. The entrepreneur        belongs to:

(a)    Command economy

(b)    Capitalistic economy

(c)    Mixed economy

(d)    All of the above

Under capitalistic economy an entrepreneur tries to earn as much profit as possible. So, option (b)is correct.

29. In which type of economy do consumers and producers make their selection based on the     market forces of demand and supply?

(a)    Socialist Economy

(b)    Controlled Economy

(c)    Mixed Economy

(d)    Market Economy

Under market economy, consumers are allowed to make their choices based on the market forces of demand and supply. So, option (d)is correct.

30. In a Socialist Economy, the concept of Consumer Sovereignty is :

(a)    restricted

(b)    open

(c)    recognised

(d)    All of the above.

Under socialist economy the concept of consumer sovereignty is restricted. So, option (a)is correct.

31. Command Economy implies :

(a)    Free Market Economy

(b)    Socialist Economy

(c)    Mixed Economy

(d)    None of these.

Socialist economy is another name of command economy. So, option (b)is correct.

32. In a command economy, all decision, from the allocation of resources of the distribution of     end products is taken care by———–

(a)    The government

(b)    The producers

(c)    Trade association

(d)    Consumer forums

In a command economy all relevant decision regarding resource allocation is taken by the government. So, option (a)is correct.

33. Which is the feature of socialist economy.

(a)    Collective ownership of means of production

(b)    Socio-Economic Objectives

(c)    Central planning Authority

(d)    All of the above.

All the decisions under socialist economy are taken by central planning authority. Socialist economy advocates the concept of collective ownership of means of production. So, option (d)is correct.

34. Which is the feature of Mixed Economy

(a)    Existence of Private, Public and Joint Sectors

(b)    Planned Economy

(c)    Balanced Regional Development

(d)    All of the above

Existence of Private, Public and Joint Sectors, Planned Economy & Balanced Regional Development are Important features of Mixed Economy.  So, option (d)is correct.

35. India Economy is an example of

(a)    Capitalist Economy

(b)    Socialist Economy

(c)    Mixed Economy

(d)    All of the above.

Indian economy is an example of mixed economy because here both private and public sector are allowed to participate in economic development. So, option (c)is correct.

36. In a Mixed Economy, industries are found in :

(a)    Private Sector

(b)    Private Sector

(c)    Joint Sector

(d)    All of the above.

In mixed economy, private sector, public sector, private public joint sector is found. So, option (d)is correct.

37. In India, the Central Planning Authority is called :

(a)    Central Government

(b)    Ministry of Finance

(c)    Ministry of Economy

(d)    Planning Commission

In India, Planning Commission works as the central planning authority. So, option (d)is correct.

38. One of main features of mixed economy is :

(a)    Co-existence of small and big industries

(b)    Promoting both agriculture and industries in the economy

(c)    Co-existence of public and private sectors.

(d)    Co-existence of rich and poor.

Mixed economy implies co-existence of public sector and private sector. So, option (c)is correct.

39. Mixed economy implies

(a)    Co-existence of medium and large industries

(b)    Promoting both agriculture and industries in the economy

(c)    Co-existence of rich and poor

(d)    Co-existence of public and private enterprises

In mixed economy, both private enterprises and public enterprises operate simultaneously. So, option (d)is correct.

40.The production possibility curve is also known as:

(a)    opportunity cost curve

(b)    transformation curve

(c)    production  possibility frontiers

(d)    all of the above

Production possibility curve also known as Opportunity Cost Curve. So, option (a)is correct.

41. The production possibilities curve is ———to the origin.

(a)    Convex

(b)    horizontal

(c)    Concave

(d)    Perpendicular

The production possibilities curve is concave to the origin. So, option (c)is correct.

42. What does an outward shift in the production possibility curve indicate?

(a)    Economic stagnation

(b)    Economic growth

(c)    Economic recession

(d)    Economy depression

Outward shift of production possibility curve implies economic growth. So, option (b)is correct.

43. The bent shape of the production possibility curve reflects the:

(a)    Increasing opportunity cost

(b)    Decreasing opportunity cost

(c)    Diminishing opportunity cost

(d)    Constant opportunity cost.

The bent shape of the production possibility curve reflects the Increasing opportunity cost. So, option (a)is correct.

44. If the opportunity cost is constant, then PPC would be:

(a)    Convex

(b)    Straight line

(c)    Bell shaped

(d)    Concave

If the opportunity cost is constant, PPC curve will be straight line. So, option (b)is correct.

45. If a point falls inside the production possibility curve. What does it indicate?

(a)    Resources are overutilized

(b)    Resources are underutilized

(c)    There is unemployment in the economy

(d)    Both b and c

If a point falls inside the production possibility curve it means both resources are under utilised or there is unemployment in the economy. So, option (d)is correct.

46. If a point falls inside the production possibility curve, what does it shows?

(a)    Resources are over utilized

(b)    Resources are under utilized

(c)    There is full employment in the economy

(d)    All of the above

If available resources are underutilized, point falls inside the PPC curve. So, option (b)is correct.

47. Due to economic growth the production possibility curve will show:

(a)    an inward shift

(b)    an outward shift

(c)    parallel shift

(d)    A  perpendicular shift.

Due to economic growth the production possibility curve will show an outward shift. So, option (b)is correct.

48. Which of these bring a rightward shift of the PPC curve?

(a)    Improvement in technology

(b)    Greater capital formation

(c)    Increase in population

(d)    All of these

Improvement in technology, greater capital formation, increase in population all brings rightward shift of the PPC curve. So, option (d)is correct.

49. National income is more often evenly distributed in a ———–

(a)    Market economy

(b)    Command economy

(c)    Mixed economy

(d)    Capitalism

Under command economy, all decision regarding resource allocation is taken by government. So, National Income is more evenly distributed under command economy. So, option (b)is correct.

50. Which school of macroeconomic thought says that prices and wages are flexible both       upward and downward?

(a)    Keynesian

(b)    Neo-Keynesian

(c)    Old

(d)    Classical

As per classical theory, price and wages are flexible both upward and demand. So, option (d)is correct.

51. The ultimate target of a firm, according to Classical School, is

(a)    Profit maximisation

(b)    Sales maximisation

(c)    Price maximisation

(d)    Maximisation of Public Welfare

According to classical theory, a firm always tries to maximise profit. So, option (a)is correct.

52. Which of the following is related to micro economics?

(a)    Inflation in the economy

(b)    Problem of unemployment

(c)    National income

(d)    Income from the railways

Income from the railways is related to microeconomics as it is related to a particular department and not the whole economy. Hence Option (d) is correct

53. Scarcity can be avoided by making:

(a)    Needs unlimited

(b)    Wants unlimited

(c)    Resources limited

(d)    Wants and needs limited

Resources are scarce because needs are unlimited. If wants and needs are limited then scarcity can be avoided. Hence Option (d) is correct

54. The U.S. economy, which uses a combination of markets and government to allocate resources, is best considered:

(a)    Socialism

(b)    Communism

(c)    Market based capitalism

(d)    Pure market economy

The U.S. economy, which uses a combination of markets and government to allocate resources, is best-considered market based capitalism. Hence Option (c) is correct

55. Capital intensive technique would get chosen in a :

(a)    Labour surplus economy

(b)    Capital surplus economy

(c)    Developed economy

(d)    Developing economy

The economy has to decide about technique of production on the basis of cost labour and capital. A labour surplus economy choose labour intensive technique and a capital surplus economy choose capital – intensive technique. Hence Option (b) is correct

56. Microeconomics is also known as:

(a)    Productive theory

(b)    Price theory

(c)    Process theory

(d)    Consumption theory

Micro economics studies the economic behaviour of the individual unit. Micro economics deals with price theory. The subject matter of price theory includes determination of prices of individual commodities. Hence Option (b) is correct

57. Micro-Economics is the study of behaviour of:

(a)    Several

(b)    Individual

(c)    Large

(d)    None of the above.

Micro economics studies the economic behaviour of the individual unit. Hence Option (b) is correct

58. Which of the following is part of micro economics

(a)    Aggregates

(b)    National Income

(c)    Demand & Supply

(d)    None of these.

In micro economics deals with demand & supply to study economic behaviour of individual unit. Hence Option (c) is correct

59. Which of the following is the part of micro economics?

(a)    Inflation in the economy

(b)    Problem of unemployment

(c)    National income

(d)    Income of firm

Income of firm is related to microeconomics as it is related to a particular department and not the whole economy. So Option (d) is correct

60. Which of the following falls under micro economics?

(a)    National income

(b)    General price level

(c)    Factor pricing

(d)    National saving and investment

Micro economy deals with individual whereas Macro economy deals with economy as a whole. Factor pricing is a part of micro economics, whereas national income, general price level, national saving and investment are part of macro economics. So, Option (c) is correct

61. Which of the following is part of Micro-Economics?

(a)    Consumer Behaviour

(b)    External Value of Money

(c)    Employment and Economic Growth

(d)    All of the above.

Consumer behaviour analysis is part of micro economics, where individual consumer’s behaviour is studied.

External value of money, employment and economic growth national income are part of macro economics where the economy is studied as a whole. So, Option (a) is correct

62. A study of how increase in the corporate income tax rate will affect the natural           unemployment rate is a illustration of:

(a)    Macro Economics

(b)    Econometrics

(c)    Micro Economics

(d)    Normative Economics

Effect of increase in corporate income tax rate on the natural unemployment rate is a matter of whole economy. If is a part of macro economics. So, Option (a) is correct.

63. A capitalist economy uses ……. As the principal means of allocating resources.

(a)    Investment

(b)    Supply

(c)    Total production

(d)    Prices

A capitalist economy applies ‘prices’ as the principal way of allocating resources, because price mechanism have pivotal role in capitalist economy. So, Option (c) is correct

64. In a capitalist economy, when consumers raise their purchase of a goods and the level of ———– exceeds ——— then prices tend to rise:

(a)    Demand, Supply

(b)    Supply, Demand

(c)    Prices, Supply

(d)    Profits, Production

Under free market economy, when consumers increase their purchase of a gods and the level of demand exceeds supply, then price will start to increase. So, Option (a) is correct

65. Another name for capitalistic economy is :

(a)    Free Market Economy

(b)    Socialist market Economy

(c)    Regulated Market Economy

(d)    Regulated Open Economy.

Another name of capitalist economy is free market economy. So, Option (a) is correct.

66. In which type of economy can each producer allocate his resources based on the demand :

(a)    Market economy

(b)    Socialistic economy

(c)    Mixed economy

(d)    Controlled economy.

Under market economy system, producer allocates resources based on the demand. So, Option (a) is correct.

67. In which type of economic system has the Government no control over price          fluctuations?

(a)    Market Economy

(b)    Socialist Economy

(c)    Mixed Economy

(d)    Controlled Economy.

Under Market Economy, government has no control on the price determination. All assets are owned by private sector price is determined with profit maximization motive. So, Option (a) is correct.

68. Under a free economy, prices are

(a)    Regulated

(b)    Determined through free interplay of demand and supply

(c)    Partly regulated

(d)    All of these

Under free economy, there are restriction on price determination. Price is settled through free interplay of demand and supply. So, Option (b) is correct.

69. The target of an entrepreneur is to earn as much profit as possible. The entrepreneur        belongs to:

(a)    Command economy

(b)    Capitalistic economy

(c)    Mixed economy

(d)    All of the above

Under capitalistic economy an entrepreneur tries to earn as much profit as possible. So, Option (b) is correct.

70. In a Mixed Economy, industries are found in :

(a)    Private Sector

(b)    Private Sector

(c)    Joint Sector

(d)    All of the above.

In mixed economy, private sector, public sector, private public joint sector is found. So, Option (d) is correct.

71. Mixed economy implies

(a)    Co-existence of medium and large industries

(b)    Promoting both agriculture and industries in the economy

(c)    Co-existence of rich and poor

(d)    Co-existence of public and private enterprises

In mixed economy, both private enterprises and public enterprises operate simultaneously. So, Option (d) is correct.

72. The production possibility curve is also known as:

(a)    opportunity cost curve

(b)    transformation curve

(c)    production  possibility frontiers

(d)    all of the above

Another name of production possibility curve is opportunity cost curve. So, Option (a) is correct.

73. Another name of production possibility curve (PPC) is :

(a)    Marginal Utility Curve

(b)    Production Possibility Frontier (PPF)

(c)    Demand curve

(d)    None of these.

Another name of production possibility curve is production possibility frontier. So, Option (b) is correct.

74. The production possibilities curve is ———to the origin.

(a)    Convex

(b)    horizontal

(c)    Concave

(d)    Perpendicular

The production possibilities curve is concave to the origin. So, Option (c) is correct.

75. What does an outward shift in the production possibility curve indicate?

(a)    Economic stagnation

(b)    Economic growth

(c)    Economic recession

(d)    Economy depression

Outward shift of production possibility curve implies economic growth. So, Option (b) is correct.

76. The bent shape of the production possibility curve reflects the:

(a)    Increasing opportunity cost

(b)    Decreasing opportunity cost

(c)    Diminishing opportunity cost

(d)    Constant opportunity cost.

The bent shape of the production possibility curve reflects the Increasing opportunity cost. So, Option (a) is correct.

77. If the opportunity cost is constant, then PPC would be:

(a)    Convex

(b)    Straight line

(c)    Bell shaped

(d)    Concave

If the opportunity cost is constant, PPC curve will be straight line. So, Option (b) is correct.

78. If a point falls inside the production possibility curve. What does it indicate?

(a)    Resources are overutilized

(b)    Resources are underutilized

(c)    There is unemployment in the economy

(d)    Both b and c

If a point falls inside the production possibility curve it means both resources are under utilised or there is unemployment in the economy. So, Option (d) is correct.

79. Due to economic growth the production possibility curve will show

(a)    an inward shift

(b)    an outward shift

(c)    parallel shift

(d)    A  perpendicular shift.

Due to economic growth the production possibility curve will show an outward shift. So, Option (b) is correct.

80. Which of these bring a rightward shift of the PPC curve?

(a)    Improvement in technology

(b)    Greater capital formation

(c)    Increase in population

(d)    All of these

Improvement in technology, greater capital formation, increase in population brings rightward shift of the PPC curve. So, Option (d) is correct.

81. According to the Keynesian model of economics, the economy consists of—————-

(a)    Labour market and money market

(b)    Labour market and product market

(c)    Money market and goods market & foreign market

(d)    Labour market, money market & goods market

As per Keynesian theory, the economy consists labour market, money market and market and goods market. So, Option (d) is correct.