MCQOPTIONS
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MCQOPTIONS
This section includes 179 Mcqs, each offering curated multiple-choice questions to sharpen your Economics (CBCS) knowledge and support exam preparation. Choose a topic below to get started.
| 101. |
In Pareto welfare economics, Efficiency of distribution of commodities among consumers is related to |
| A. | efficiency in production |
| B. | efficiency in exchange |
| C. | efficiency in product-mix |
| D. | All of the above |
| Answer» C. efficiency in product-mix | |
| 102. |
In Pareto welfare economics, Efficiency in the allocation of factors among commodities is related to |
| A. | efficiency in production |
| B. | efficiency in exchange |
| C. | efficiency in product-mix |
| D. | All of the above |
| Answer» D. All of the above | |
| 103. |
The marginal condition for a Pareto-optimal allocation of factors requires that the ________ between labour and capital be equal for all commodities produced by different firms. |
| A. | MRS |
| B. | MRTS |
| C. | DMR |
| D. | MC |
| Answer» C. DMR | |
| 104. |
According to Keynes interest is a payment for |
| A. | Consumer's preference |
| B. | Producer's preference |
| C. | Liquidity preference |
| D. | State Bank's preference |
| Answer» D. State Bank's preference | |
| 105. |
Profits arise because an entrepreneur: |
| A. | Prepares plan |
| B. | Innovates |
| C. | Lends money |
| D. | Both (a) and (b |
| Answer» E. | |
| 106. |
In Pareto welfare economics, Efficiency of the allocation of factors among firms is related to |
| A. | efficiency in production |
| B. | efficiency in exchange |
| C. | efficiency in product-mix |
| D. | All of the above |
| Answer» B. efficiency in exchange | |
| 107. |
The marginal condition for a Pareto-optimal or -efficient distribution of commodities among consumers requires that the MRS between ______ be equal for all consumers. |
| A. | Two factors |
| B. | Two goods |
| C. | Two consumers |
| D. | Two producers |
| Answer» C. Two consumers | |
| 108. |
What is the net present value? |
| A. | the future value of a project s cash flows plus its initial cost |
| B. | the present value of a project s cash flows plus its initial cost |
| C. | the future value of a project s cash flows minus its initial cost |
| D. | the present value of a project s cash flows minus its initial cost |
| Answer» E. | |
| 109. |
Why are projects with negative net present values (NPVs) unacceptable to a firm? |
| A. | Returns lower than the cost of capital result in firm failure. |
| B. | Returns with negative NPVs cause an equal profit ratio. |
| C. | Returns with negative NPVs are acceptable to a firm |
| D. | Returns lower than the cost of capital result in higher profit ratios |
| Answer» B. Returns with negative NPVs cause an equal profit ratio. | |
| 110. |
The Internal Rate of Return is defined as |
| A. | the discount rate which causes the payback to equal one year. |
| B. | the discount rate which causes the NPV to equal zero. |
| C. | the ROE when the NPV equals 0. |
| D. | the ROE associated with project maximization |
| Answer» C. the ROE when the NPV equals 0. | |
| 111. |
Each of the following techniques use discounted cash flows to incorporate the time value of money into their analysis except |
| A. | payback method |
| B. | internal rate of return (IRR |
| C. | net present value (NPV |
| D. | modified internal rate of return |
| Answer» B. internal rate of return (IRR | |
| 112. |
In order to maximize profits, a firm should produce at the output level for which |
| A. | Average cost is minimised |
| B. | Marginal cost equals marginal revenue |
| C. | marginal cost is minimised |
| D. | All of the above |
| Answer» C. marginal cost is minimised | |
| 113. |
A manager can presume that the project will enhance shareholder wealth only if its NPV based on the risk adjusted rate is |
| A. | equal |
| B. | zero. |
| C. | negative. |
| D. | positive. |
| Answer» E. | |
| 114. |
The opportunity cost of a machine which can produce only one product is: |
| A. | Low |
| B. | Infinite |
| C. | High |
| D. | Medium |
| Answer» B. Infinite | |
| 115. |
The higher the interest rate |
| A. | The more valuable revenue today is in comparison with revenue in the future. |
| B. | The less valuable revenue today is in comparison with revenue in the future |
| C. | The less costs today should be considered in capital budgeting |
| D. | The less concerned you should be about the timing of a stream of revenue. |
| Answer» B. The less valuable revenue today is in comparison with revenue in the future | |
| 116. |
The net present value |
| A. | Is calculated by discounting all cash flows to present value and subtracting outflows from inflows |
| B. | Calculates the rate of return which leaves you indifferent between undertaking the project, and not undertaking the project. |
| C. | Leads to the same decisions as the use of the payback peri |
| Answer» B. Calculates the rate of return which leaves you indifferent between undertaking the project, and not undertaking the project. | |
| 117. |
This is not a function of the entrepreneur: |
| A. | Supervise |
| B. | Innovate |
| C. | Lend money |
| D. | Prepare plan |
| Answer» D. Prepare plan | |
| 118. |
When using the net present value and the internal rate of return to evaluate capital projects: |
| A. | The IRR is preferred because it more closely reflects the firm's goal of maximization of shareholder wealth. |
| B. | Both will lead to the same decision if projects are mutually exclusive. |
| C. | The two techniques may give different answers if the initial costs of the projects differ. |
| D. | Both assume that the firm can reinvest earnings at the same rate. |
| Answer» D. Both assume that the firm can reinvest earnings at the same rate. | |
| 119. |
If the internal rate of return (r) is less than the cost of capital,the project should be |
| A. | accepted |
| B. | rejected |
| C. | neither accept nor reject |
| D. | none of the above |
| Answer» C. neither accept nor reject | |
| 120. |
Union leaders are in a better position to bargain for higher wages if demand for labour is |
| A. | Elastic |
| B. | Inelastic |
| C. | Very large |
| D. | Permanent |
| Answer» C. Very large | |
| 121. |
One similarity between international trade and inter-regional trade is that in general both must overcome |
| A. | The difference in language |
| B. | Tariffs |
| C. | Distance or space |
| D. | The difference in currencies |
| Answer» D. The difference in currencies | |
| 122. |
With decrease in price of bonds, rate of interest: |
| A. | Decreases |
| B. | Increases |
| C. | Does not change |
| D. | None of the above |
| Answer» C. Does not change | |
| 123. |
If capital is available in large proportion and labour is less, then that economy is known as |
| A. | Capital Intensive |
| B. | Labour Intensive |
| C. | Both (a) and (b |
| D. | None of above |
| Answer» B. Labour Intensive | |
| 124. |
Demand for factor of production is |
| A. | Supplementary demand |
| B. | Intermediate goods |
| C. | Derived demand |
| D. | Complementary demand |
| Answer» D. Complementary demand | |
| 125. |
The relation that the law of demand for factor defines is. |
| A. | Income and quantity demanded of a factor |
| B. | Price and quantity of a factor |
| C. | Income and price of a factor |
| D. | Quantity demanded and quantity supplied of a factor |
| Answer» C. Income and price of a factor | |
| 126. |
Every factor of production gets reward equal to its: |
| A. | Cost |
| B. | Marginal product |
| C. | Price |
| D. | Increasing return |
| Answer» C. Price | |
| 127. |
A firm maximizes profit if: |
| A. | MRP = Wage rate |
| B. | MRP is rising |
| C. | MRP = ARP |
| D. | None of these |
| Answer» B. MRP is rising | |
| 128. |
Under conditions of perfect competition in the product market: |
| A. | MRP = VMP |
| B. | MRP > VMP |
| C. | VMP > MRP |
| D. | None of the above |
| Answer» B. MRP > VMP | |
| 129. |
An increase in the wage rate: |
| A. | Will usually lead to more people employed |
| B. | Will decrease total earnings of employees if the demand for labour is wage elastic |
| C. | Is illegal in a free market |
| D. | Will cause a shift in the demand for labour |
| Answer» C. Is illegal in a free market | |
| 130. |
A market system where there is only one buyer, is known as. |
| A. | Monopoly |
| B. | Monopolistic competition |
| C. | Monopsony |
| D. | Monopsonistic competition |
| Answer» D. Monopsonistic competition | |
| 131. |
A market system, where there is only one seller is known as |
| A. | Monopoly |
| B. | Monopolistic competition |
| C. | Oligopoly |
| D. | Monopsony |
| Answer» B. Monopolistic competition | |
| 132. |
Gross profit does NOT include: |
| A. | Rent of land owned by the firm |
| B. | Pure profit |
| C. | Interest on capital owned by firm |
| D. | Taxes |
| Answer» E. | |
| 133. |
Some economists say that profit earner is a kind of: |
| A. | Wage earner |
| B. | Rent receiver |
| C. | Interest receiver |
| D. | Govt. officer |
| Answer» B. Rent receiver | |
| 134. |
What determines the pattern of specialisation and trade in industries with external economies of scale? |
| A. | Product differentiation |
| B. | Monopolistic competition |
| C. | Historical competition |
| D. | None of the above |
| Answer» D. None of the above | |
| 135. |
The market, where the services of factor of production are bought and sold is, is |
| A. | Product market |
| B. | Factor market |
| C. | Commodity market |
| D. | Monopoly market |
| Answer» C. Commodity market | |
| 136. |
A decrease in the supply of labour is likely to lead to: |
| A. | A lower equilibrium wage and lower quantity of labour employed |
| B. | A lower equilibrium wage and higher quantity of labour employed |
| C. | A higher equilibrium wage and higher quantity of labour employed |
| D. | A higher equilibrium wage and lower quantity of labour employed |
| Answer» E. | |
| 137. |
Sometimes the supply curve of labour ends: |
| A. | Downward |
| B. | Upward |
| C. | Backward |
| D. | Firstly upward and then downward |
| Answer» D. Firstly upward and then downward | |
| 138. |
Which of the following is a characteristic of capital as a factor of production? |
| A. | It is fixed in supply |
| B. | It never depreciates |
| C. | It is a passive factor of production |
| D. | It is an active factor of production |
| Answer» D. It is an active factor of production | |
| 139. |
Factor prices are determined in the market under forces of |
| A. | Elasticity of demand |
| B. | Elasticity of supply |
| C. | Elasticity and supply |
| D. | None of the above |
| Answer» E. | |
| 140. |
The exchange of goods and services are known as |
| A. | International Trade |
| B. | Trade |
| C. | None of these |
| D. | Domestic Trade |
| Answer» C. None of these | |
| 141. |
Suppose a country's workers can produce 4 watches per hour or 12 rings per hour. If there is no trade, |
| A. | the domestic price of 1 ring is 1/4 of a watch. |
| B. | the domestic price of 1 ring is 3 watches. |
| C. | the domestic price of 1 ring is 1/3 of a watch. |
| D. | the domestic price of 1 ring is 12 watches |
| Answer» D. the domestic price of 1 ring is 12 watches | |
| 142. |
The firm is in equilibrium in the factor market when it employs units of labour upto the point where |
| A. | The marginal revenue product of labour is equal to its marginal cost |
| B. | The marginal revenue product of labour is more than its marginal cost |
| C. | The marginal revenue product of labour is less than its marginal cost |
| D. | none |
| Answer» B. The marginal revenue product of labour is more than its marginal cost | |
| 143. |
Equilibrium conditions for factor market is |
| A. | Demand for factors is equal to supply of factors |
| B. | Demand for factors is less than supply of factors |
| C. | Demand for factors is more than supply of factors |
| D. | None of the above |
| Answer» B. Demand for factors is less than supply of factors | |
| 144. |
Factor market will be in equilibrium when |
| A. | Demand for factors is less than its supply |
| B. | Demand for factors is equal to supply of factors |
| C. | Supply of factors is less than for it |
| D. | All of the above |
| Answer» C. Supply of factors is less than for it | |
| 145. |
In a perfectly competitive market a firm in the long run will be in equilibrium when: |
| A. | AC = MC |
| B. | AR = MR |
| C. | MR = MC |
| D. | Price = AR = MR= AC= MC |
| Answer» E. | |
| 146. |
The labour market equilibrium determines the wage rate and |
| A. | Investment |
| B. | Employment |
| C. | Savings |
| D. | Profits |
| Answer» C. Savings | |
| 147. |
When price is below equilibrium level, there will be: |
| A. | Surplus commodity in the market |
| B. | Supply curve will shift |
| C. | Demand curve will shift |
| D. | Shortage of commodity in the market |
| Answer» E. | |
| 148. |
Suppose the world consists of two countries: the UK and Spain. Further, suppose there are only two goods--food and clothing. Which of the following statements is true? |
| A. | If the UK has an absolute advantage in the production of food, then Spain must have an absolute advantage in the production of clothing. |
| B. | If the UK has a comparative advantage in the production of food, Spain might also have a comparative advantage in the production of food. |
| C. | If the UK has a comparative advantage in the production of food, it must also have a comparative advantage in the production of clothing |
| D. | If the UK has a comparative advantage in the production of food, then Spain must have a comparative advantage in the production of clothing |
| Answer» E. | |
| 149. |
According to the principle of comparative advantage, |
| A. | 7countries should specialize in the production of goods that they enjoy consuming. |
| B. | countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners. |
| C. | countries with a comparative advantage in the production of every good need not specialize. |
| D. | countries should specialize in the production of goods for which they use fewer resources in production than their trading partners. |
| Answer» C. countries with a comparative advantage in the production of every good need not specialize. | |
| 150. |
A main advantage in specialisation results from: |
| A. | Economies of large-scale production |
| B. | The specializing country behaving as monopoly |
| C. | Smaller production runs resulting in lower unit costs. |
| D. | High wages paied to foreign workers. |
| Answer» B. The specializing country behaving as monopoly | |