laboursonline – MCQs, Mock Tests | Economics Economics Demand and Supply Set-2

Contraction of demand is the result of:

1. Decrease in the number of consumers
2. Increase in the price of the commodity concerned
3. Increase in the prices of other goods
4. Decrease in the income of purchasers

✅ Correct Answer: 2

All but one of the following are assumed to remain the same while drawing an individuals demand curve for a commodity. Which one is it?

1. The preferences of the individual
2. His monetary income
3. The price of the commodity under consideration
4. The prices of other goods

✅ Correct Answer: 3

Which of the following pairs of commodities is an example of substitutes?

1. Tea and sugar
2. Tea and coffee
3. Pen and ink
4. Shirt and trousers

✅ Correct Answer: 2

In the case of a straight-line demand curve meeting the two axes the price-elasticity of demand at the mid-point of the line would be:

1. 0
2. 1
3. 1.5
4. 2

✅ Correct Answer: 2

The Law of Demand assuming other things to remain constant establishes the relationship between:

1. Income of the consumer and the quantity of a commodity demanded by him
2. Price of a commodity and the quantity demanded
3. Price of a commodity and the demand for its substitute
4. Quantity demanded of a commodity and the relative prices of its complementary goods

✅ Correct Answer: 2

Identify the factor which generally keeps the price-elasticity of demand for a commodity now:

1. Variety of uses for that commodity
2. Its low price
3. Close substitutes for that commodity
4.

✅ Correct Answer: 2

Identify the coefficient of price-elasticity of demand when the percentage increase in the quantity of a commodity demanded is smaller than the percentage fall in its price:

1. Equal to one
2. Greater than one
3. Small than one
4. Zero

✅ Correct Answer: 3

In the case of an inferior good the income elasticity of demand is:

1. Positive
2. Zero
3. Negative
4. Infinite

✅ Correct Answer: 3

In respect of which of the following category of goods is consumers surplus highest?

1. Giffen goods
2. Necessities
3. Luxuries
4. Prestige goods

✅ Correct Answer: 2

Total utility is maximum when:

1. Marginal utility is zero
2. Marginal utility is at its highest point
3. Marginal utility is equal to average
4. Average utility is maximum

✅ Correct Answer: 1

If the demand for a commodity is inelastic an increase in its price will cause the total expenditure of the consumers of the commodity to:

1. Remain the same
2. Increase
3. Decrease
4. Any of the above

✅ Correct Answer: 2

If regardless of changes in its price the quantity demanded of a commodity remains unchanged then the demand curve for the commodity will be:

1. Horizontal
2. Vertical
3. Positively sloped
4. Negatively sloped

✅ Correct Answer: 2

In the case of a Giffen good the demand curve will be:

1. Horizontal
2. Downward
3. Backward falling to the left
4. Upward-slopping to the right

✅ Correct Answer: 3

The budget-line is also known as the:

1. Iso-utility curve
2. Production possibility line
3. Isoquant
4. Consumption possibility line

✅ Correct Answer: 4

Which one is not a assumption of the theory of demand based on analysis of indifference curves?

1. Given scale of preferences as between different combinations of two goods
2. Diminishing marginal rate of substitution
3. Constant marginal utility of money
4. Consumers would always prefer more of a particular good to less of it other things remaining the same

✅ Correct Answer: 3

The elasticity of substitution between two perfect substitutions is:

1. Zero
2. Greater than zero
3. Less than infinity
4. Infinity

✅ Correct Answer: 4

The consumer is in equilibrium at a point where the budget line:

1. Is above an indifference curve
2. Is below an indifference curve
3. Is tangent to an indifference curve
4. Cuts an indifference curve

✅ Correct Answer: 3

An indifference curve slopes down towards right since more of one commodity and less of another result in:

1. Same satisfaction
2. Greater satisfaction
3. Maximum satisfaction
4. Decreasing Expenditure

✅ Correct Answer: 1

The Revealed Preference Theory deduces the inverse price-quantity relationship from:

1. Assumption of indifference
2. Postulate of utility maximization
3. Observed behaviour of the consumer
4. Introspection

✅ Correct Answer: 3

Which of the following statements is incorrect?

1. An indifference curve must be downward sloping to the right
2. Convexity of a curve implies that the slope of the curve diminishes as one moves from left to right
3. The elasticity of substitution between two goods to a consumer is zero
4. The total effect of a change in the price of a good on its quantity demanded is called the price effect

✅ Correct Answer: 3

Production is a function of:

1. Profits
2. Costs
3. Inputs
4. Price

✅ Correct Answer: 1

An ISO-product curve slopes:

1. Downward to the left
2. Downward to the right
3. Upward to the left
4. Upward to the right

✅ Correct Answer: 2

A vertical supply curve parallel to the price axis implies that the elasticity of supply is:

1. Zero
2. Indinity
3. Equal to one
4. Greater than zero but less than infinity

✅ Correct Answer: 1

The supply of a commodity refers to:

1. Actual production of the commodity
2. Total existing stock of the commodity
3. Stock available for sale
4. Amount of the commodity offered for sale at a particular price per unit of time

✅ Correct Answer: 4

Which cost increases continuously with the increase in production?

1. Average cost
2. Marginal cost
3. Fixed cost
4. Variable cost

✅ Correct Answer: 4

Which of the following cost curves is never Un-shaped?

1. Average cost curve
2. Marginal cost curve
3. Average variable cost curve
4. Average fixed cost curve

✅ Correct Answer: 4

Total costs in the short-term are classified into fixed costs and varibale costs. Which one of the following is a variable cost?

1. Cost of raw materials
2. Cost of equipment
3. Interest payment on past borrowing
4. Payment of rent on buildings

✅ Correct Answer: 1

In the short term when the output of a firm increases its average fixed cost:

1. Increase
2. Decrease
3. Remains constant
4. First declines and then rises

✅ Correct Answer: 2

A significant property of the Cobb - Douglas production function is that the elasticity of substitution between inputs is:

1. Equal to unity
2. More than unity
3. Less than unity
4. Zero

✅ Correct Answer: 1

The production techniques are technically efficient:

1. Below the lower ridge line
2. Above the upper ridge line
3. Between the two ridge lines
4. On the upper ridge line

✅ Correct Answer: 3

Which of the following is not a feature of iso-product curves? Iso-product curves:

1. Are downward sloping to the right
2. Show different input combination producing the same output
3. Intersect each other
4. Are convex to the origin

✅ Correct Answer: 3

Some economists refer to iso-product curves as:

1. Engels curve
2. Production indifference curve
3. Budget line
4. Ridge line

✅ Correct Answer: 2

Which one of the following is also known as plant curves?

1. Long-run average cost (LAC) curves
2. Short-run average cost (SAC) curves
3. Average variable cost (AVC) curves
4. Average total cost (ATC) curves

✅ Correct Answer: 2

What is the shape of the average fixed cost (AFC) curve?

1. U-shape
2. Horizontal upto a point and then rising
3. Sloping down towards the right
4. Rectangular hyperbola

✅ Correct Answer: 4

An increase in the supply of a commodity is caused by:

1. Improvements in its technology
2. Fall in the prices of other commodities
3. Fall in the prices of factors of production
4. All of the above

✅ Correct Answer: 4

Elasticity of supply refers to the degree of responsiveness of supply of a commodity to changes in its:

1. Demand
2. Price
3. Costs of production
4. State of technology

✅ Correct Answer: 2

The cost of one thing in terms of the alternative given up is known as:

1. Production cost
2. Physical cost
3. Real cost
4. Opportunity cost

✅ Correct Answer: 4

According to current thinking the law of diminishing returns applies to:

1. All fields of production
2. Agriculture
3. Mining
4. Manufacturing

✅ Correct Answer: 1

Identify the correct statement:

1. The average product is at its maximum when the marginal product is equal to the average product
2. The law of increasing returns relates to the effect of changes in factor proportions
3. Economies of scale arise only because of indivisibilities of factors of production
4. The production possibility curve and the transformation curve are different curves

✅ Correct Answer: 3

With which of the following is the concept of marginal cost closely related?

1. Variable cost
2. Fixed cost
3. Implicit cost
4. Explicit cost

✅ Correct Answer: 1

According to M. Kalecki the true measure of the degree of monopoly power is the:

1. Ratio between price and marginal cost
2. Extent of monopolistic profit enjoyed by the monopolist
3. Cross-elasticity of demand for the product of the monopolist
4. Price charged by the monopoliist minus marginal cost of production

✅ Correct Answer: 1

A monopolist is able to maximize his profit when:

1. His output is maximum
2. He charges a high price
3. His average cost is minimum
4. His maginal revenue is equal to marginal cost

✅ Correct Answer: 4

Which of the following is not an essential condition of pure competition?

1. Large number of buyers and sellers
2. Homogeneous product
3. Freedom of entry
4. Absence of transport cost

✅ Correct Answer: 4

What is the shape of the demand curve faced by a firm under perfect competition?

1. Horizontal
2. Vertical
3. Positively sloped
4. Negatively sloped

✅ Correct Answer: 1

Which is the first-order condition for the profit of a firm to be maximum?

1. AC = MR
2. MC = MR
3. MR = AR
4. AC = AR

✅ Correct Answer: 2

In which form of the market structure in the degree of control over the price of its product by a firm very large?

1. Monopoly
2. Imperfect competition
3. Oligopoly
4. Perfect competition

✅ Correct Answer: 1

Which is the other name that is given to the average revenue curve?

1. Profit curve
2. Demand curve
3. Average cost curve
4. Indifference curve

✅ Correct Answer: 2

Under which of the following forms of market structure does a firm have no control over the price of its product?

1. Monopoly
2. Monopolistic competition
3. Oligopoly
4. Perfect competition

✅ Correct Answer: 4

Which one of the following is the condition of equilibrium for the monopolist?

1. MR = MC
2. MC = AR
3. MR = MC = Price
4. AC = AR

✅ Correct Answer: 1

The situation of monopolistic competition is created by:

1. Small number of producers of a commodity
2. Lack of homogeneity of the product produced by different firms
3. Imperfection of the market for that product
4. All of the above

✅ Correct Answer: 4

Discriminating monopoly implies that the monopolist charges different prices for his commodity:

1. From different groups of consumers
2. For different uses
3. At different places
4. Any of the above

✅ Correct Answer: 4

Price discrimination will be profitable only if the elasticity of demand in different markets into which the total market has been divided is:

1. Uniform
2. Different
3. Less
4. Zero

✅ Correct Answer: 2

Which of the following oligopoly models is concerned with the maximization of joint profits?

1. Price leadership model
2. Bertrands model
3. Collusive model
4. Edge worths model

✅ Correct Answer: 3

The Kinky demand curve hypothesis is designed to explain in the context of oligopoly:

1. Price and output determination
2. Price rigidity
3. Price leadership
4. Collusion among rivals

✅ Correct Answer: 1

Which form of market structure is characterised by interdependence in decision-making as between the different competing firms?None of the above

1. Oligopoly
2. Perfect competition
3. Imperfect competition
4. None of the above

✅ Correct Answer: 1

Which one of the following is not the assumption of the Marginal Productivity Theory of Distribution?

1. Homogeneity of a factor
2. Perfect competition in the factor market
3. All factors except one are variable
4. Given stock of each factor and full employment

✅ Correct Answer: 3

With which of the theories of wages is the name of John Stuart Mill associated?

1. Marginal productivity theory of wages
2. Wages-fund theory
3. Subsistence theory of wages
4. Iron law of wages

✅ Correct Answer: 2

Under monophony in the labour market the supply curve of labour facing the firm will be:

1. Upward-sloping to the right
2. Downward-sloping to the right
3. Backward-sloping to the left
4. Horizontal

✅ Correct Answer: 1

Economic rent can accrue to:

1. Land only
2. Capital only
3. Specialised technical personnel only
4. Any of the factors of production

✅ Correct Answer: 4

Which of the following statements is incorrect?

1. Quasi-rent is a purely short-term phenomenon
2. Rent is exclusively demand determined
3. Rent can accrue to land alone
4. Rent is the excess of actual earnings over transfer earnings

✅ Correct Answer: 3

In the context of the firm as a whole quasi-rent is defined as the excess of the total receipts over the total:

1. Fixed cost
2. Average cost
3. Fixed and variable cost
4. Variable cost

✅ Correct Answer: 4

A factor of production whose supply is fixed in the short run may get additional earnings. These earnings are generally referred to as:

1. Surplus value
2. Quasi-rent
3. Transfer earnings
4. Supernormal profit

✅ Correct Answer: 2

Which of the following factors forms the basis of the Loan able Funds Theory of Interest?

1. Monetary factors
2. Psychological factors
3. Technical factors
4. Monetary and non monetary factors

✅ Correct Answer: 4

Which of the following purposes normally does not give rise to the demand for loan able funds?

1. Consumption
2. Saving
3. Investment
4. Hoarding

✅ Correct Answer: 2

On which of the following does the demand for money for speculative motive mainly depend?

1. Income
2. Profits
3. Rate of interest
4. General price level

✅ Correct Answer: 3

The demand for liquidity preference is governed by:

1. Transaction motives
2. Precautionary motives
3. Speculative motives
4. All of these

✅ Correct Answer: 4

Identify the neo-classical theory of the rate of interest:

1. Liquidity-preference theory
2. Time preference theory
3. Abstinence theory
4. Loan able funds theory

✅ Correct Answer: 4

The classical theory explained interest as a reward for:

1. Parting with liquidity
2. Abstinence
3. Saving
4. Inconvenience

✅ Correct Answer: 3

According to Joseph Schumpeter profit is the reward for:

1. Innovation
2. Uncertainty-bearing
3. Risk-taking
4. Management

✅ Correct Answer: 1

The term normal profit as used in the analysis of equilibrium of the firm under perfect competition refers to:

1. Earnings of management
2. Reward for enterprise
3. Reward for innovation
4. Residual income of a business

✅ Correct Answer: 1