MCQs in Economics - (for CA-CPT) 0070264341, 9780070264342

Table of contents :
Title
Contents
Section 1 Microeconomics
Unit 1 Introduction to Microeconomics
1 Microeconomics: An Introduction
Unit 2 Theory of Demand and Supply
2 Law of Demand and Elasticity of Demand
3 Theories of Consumer Behaviour
4 Supply
Unit 3 Theory of Production and Cost
5 Theory of Production
6 Theory of Cost
Unit 4 Price Determination in Different Markets
7 Meaning and Types of Markets
8 Determination of Price
9 Price–Output Determination Under Different Market Forms
Section 2 Indian Economic Development
Unit 5 Indian Economy- A Profile
10 Nature of Indian Economy
11 Role of Different Sectors in India
12 National Income in India
13 Basic Understanding of Tax System in India
Unit 6 Select Aspects of Indian Economy
14 Population
15 Poverty
16 Unemployment
17 Infrastructural Challenges
18 Inflation
19 Budget and Fiscal Deficit in India
20 Balance of Payments
21 External Debt
Unit 7 Economic Reforms in India
22 Economic Reforms and Liberalisation
23 Liberalisation, Privatisation and Disinvestment
24 Globalisation
Unit 8 Money and Banking
25 Money
26 Commercial Banks
27 The Reserve Bank of India(RBI)
Model Test Paper I
Model Test Paper II

Citation preview

MCQs IN

ECONOMICS FOR

CA COMMON PROFICIENCY TEST

MCQS IN

ECONOMICS FOR

CA COMMON PROFICIENCY TEST

Dr. Deepashree Reader in Economics Department of Commerce Shri Ram College of Commerce University of Delhi, Delhi

Tata McGraw-Hill Publishing Company Limited NEW DELHI

McGraw-Hill Offices New Delhi New York St Louis San Francisco Auckland Bogotá Caracas Kuala Lumpur Lisbon London Madrid Mexico City Milan Montreal San Juan Santiago Singapore Sydney Tokyo Toronto

Published by the Tata McGraw-Hill Publishing Company Limited, 7 West Patel Nagar, New Delhi 110 008. MCQs in Economics Copyright © 2009, by Tata McGraw-Hill Publishing Company Limited. No part of this publication may be reproduced or distributed in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise or stored in a database or retrieval system without the prior written permission of the publishers. The program listings (if any) may be entered, stored and executed in a computer system, but they may not be reproduced for publication. This edition can be exported from India only by the publishers, Tata McGraw-Hill Publishing Company Limited ISBN (13 digits): 978-0-07-026434-2 ISBN (10 digits): 0-07-026434-1 Managing Director: Ajay Shukla General Manager—Publishing (B&E/HSSL & School): V Biju Kumar Editorial Manager—B&E: Tapas K Maji Junior Editorial Executive: Hemant K Jha Junior Editorial Executive: Rajneesh Roy Executive (Editorial Services): Anubha Srivastava Senior Product Manager: Manohar Lal General Manager—Marketing (Higher Ed & School): Michael J Cruz Asst. Product Manager—Vijay S Jagannathan Controller—Production: Rajender P. Ghansela Asst. General Manager—Production: B L Dogra Information contained in this work has been obtained by Tata McGraw-Hill, from sources believed to be reliable. However, neither Tata McGraw-Hill nor its authors guarantee the accuracy or completeness of any information published herein, and neither Tata McGrawHill nor its authors shall be responsible for any errors, omissions, or damages arising out of use of this information. This work is published with the understanding that Tata McGraw-Hill and its authors are supplying information but are not attempting to render professional services. If such services are required, the assistance of an appropriate professional should be sought. Typeset at The Composers, 260, C.A. Apt., Paschim Vihar, New Delhi 110 063 Printed at Adarsh Printers, C-50-51, Mohan Park, Naveen Shahdara, Delhi 110032 Cover Printer: Rashtriya Printers RADZCDRFRXADZ

With Sai Kripa Dedicated to the memory of My Dear Parents

Preface As a teacher and an author of many books on microeconomics, macroeconomics and Indian economy, I am glad that audience from various walks of academic life have appreciated my efforts at writing books that have been of use to them. This has led to my indulgence in writing a book on General Economics, specially designed to meet the requirements of the new syllabus of Common Proficiency Test (CPT) for Chartered Accountant students. This book is a compilation of Multiple Choice Questions covering the latest General Economics syllabus. The new syllabus requires students to have indepth knowledge of every aspect of Economics. The latest trend is to ask students Multiple Choice Questions (MCQs) which have four choices which might confuse them. The correct answer has to be marked with a tick (ü). This book gives the student a lot of practice. The questions should be attempted after seriously studying the theoretical contents given in my main CPT book. I have tried to cover each aspect of every topic in these MCQs. Suggestions for further improvement of the book will be thankfully acknowledged. DR. DEEPASHREE

Syllabus General Economics (50 Marks) Objective: To ensure basic understanding of economic systems, economic behaviour of individuals and organizations. Section One: Microeconomics 1. Introduction to Microeconomics (a) Definition, scope and nature of Economics (b) Methods of economic study (c) Central problems of an economy and Production possibilities curve. 2. Theory of Demand and Supply (a) Meaning and determinants of demand, Law of demand and Elasticity of demand—price, income and cross elasticity (b) Theory of consumer’s behaviour—Marshallian approach and Indifference curve approach (c) Meaning and determinants of supply, Law of supply and Elasticity of supply. 3. Theory of Production and Cost (a) Meaning and Factors of production (b) Laws of Production—The Law of variable proportions and Laws of returns to scale. (c) Concepts of Costs—Shortrun and longrun costs, Average and marginal costs, Total, fixed and variable costs. 4. Price Determination in Different Markets (a) Various forms of markets—Perfect competition, Monopoly, Monopolistic Competition and Oligopoly (b) Price determination in these markets. Section Two: Indian Economy—A Profile 5. Indian Economy—A Profile (a) Nature of Indian Economy (b) Role of different sectors-Agriculture, Industry and Services in the development of the. Indian economy, their problems and growth

x

Syllabus

(c) National Income of India—Concepts of national income, Different methods of measuring national income, Growth of national income and per capita income in various plans. (d) Basic understanding of tax system of India—Direct and Indirect Taxation. 6. Select Aspects of Indian Economy (a) Population—Its size, rate of growth and its implication for growth (b) Poverty—Absolute .and relative poverty and main programs for poverty alleviation (c) Unemployment—Types, causes and incidence of unemployment (d) Infrastructure—Energy, Transportation, Communication, Health and Education (e) Inflation (f) Budget and Fiscal deficits (g) Balance of payments (h) External debts. 7. Economic Reforms in India (a) Features of economic reforms since 1991 (b) Liberalisation, Privatisation and Disinvestment (c) Globalisation. 8. Money and Banking (a) Money—Meaning and functions (b) Commercial Banks—Role and functions (c) Reserve Bank of India—Role and functions, Monetary policy.

Chapter Plan Section One—MICROECONOMICS 1. 2. 3. 4. 5. 6. 7. 8. 9.

Microeconomics: An Introduction Law of Demand and Elasticity of Demand Theories of Consumer Behaviour Supply Theory of Production Theory of Cost Meaning and Types of Markets Determination of Price Price-output Determination under Different Market Forms

Section Two—INDIAN ECONOMIC DEVELOPMENT 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27.

Nature of Indian Economy Role of Different Sectors in India National Income in India Basic Understanding of Tax System in India Population Poverty Unemployment Infrastructural Challenges Inflation Budget and Fiscal Deficit in India Balance of Payments External Debt Economic Reforms and Liberalisation Liberalisation, Privatisation and Disinvestment Globalisation Money Commercial Banks The Reserve Bank of India (RBI)

Contents Preface Syllabus Chapter Plan

vii ix xi SECTION ONE MICROECONOMICS

Unit 1 Introduction to Microeconomics 1. Microeconomics: An Introduction

1.5-1.13

Unit 2 Theory of Demand and Supply 2. Law of Demand and Elasticity of Demand 3. Theories of Consumer Behaviour 4. Supply

2.3-2.11 3.1-3.9 4.1-4.10

Unit 3 Theory of Production and Cost 5. Theory of Production 6. Theory of Cost

5.3-5.11 6.1-6.9

Unit 4 Price Determination of Different Markets 7. Meaning and Types of Markets 8. Determination of Price 9. Price-output Determination under Different Market Forms

7.3-7.10 8.1-8.5 9.1-9.8

SECTION TWO INDIAN ECONOMIC DEVELOPMENT Unit 5 Indian Economy—A Profile 10. Nature of Indian Economy 11. Role of Different Sectors in India 12. National Income in India 13. Basic Understanding of Tax System in India

10.5-10.7 11.1-11.3 12.1-12.4 13.1-13.3

Unit 6 Select Aspects of Indian Economy 14. Population 15. Poverty 16. Unemployment 17. Infrastructural Challenges 18. Inflation

14.3-14.5 15.1-15.4 16.1-16.3 17.1-17.4 18.1-18.4

xiv Contents

19. Budget and Fiscal Deficit in India 20. Balance of Payments 21. External Debt

19.1-19.3 20.1-20.4 21.1-21.3

Unit 7 Economic Reforms in India 22. Economic Reforms and Liberalisation 22.3-22.6 23. Liberalisation, Privatisation and Disinvestment 23.1-23.3 24. Globalisation 24.1-24.4 Unit 8 Money and Banking 25. Money 26. Commercial Banks 27. The Reserve Bank of India (RBI) Model Test Paper I Model Test Paper II

25.3-25.6 26.1-26.3 27.1-27.4 P.1-P.7 P.1-P.8

Section One Microeconomics

1. Microeconomics: An Introduction

chapter 1 Microeconomics: An Introduction

Topics Covered l What is Economics? l Nature of Economics— Is Economics a Science or an Art? l Positive and Normative Science l Microeconomics and Macroeconomics l Methods of Constructing an Economic Theory l Central Economic Problems l Production Possibility Curve and Opportunity Cost l Different Economic Systems

1.6 MCQs in Economics

1. Growth definition by Samuelson has: (a) An element of time in its. (b) Touches about economic growth and welfare concepts. (c) Talks about the problem of scarcity of resources. (d) All of the above 2. Who gave welfare definition of Economics? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 3. Who gave wealth definition of Economics? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 4. Who gave scarcity definition of Economics? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 5. Who wrote ‘Nature and Significance of Economic Science’? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 6. Who wrote ‘ Nature and Causes of Wealth of Nations’? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 7. Who said “Law of Economics are like the law of tides”? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 8. Economics is: (a) A science (b) An art (c) Both a science and an art (d) Neither a science nor an art 9. Positive economics is based on: (a) Cause and effect of facts (b) Ethics (c) Value judgments (d) All of the above

Microeconomics: An Introduction

1.7

10. Normative economics is based on: (a) Cause and effect of facts (b) Ethics (c) Value judgments (d) Both (b) and (c) 11. Chemistry is: (a) Positive economics (b) Normative economics (c) Both positive and normative economics (d) None of the above 12. Ethics is: (a) Positive economics (b) Normative economics (c) Both positive and normative economics (d) None of the above 13. Which economics deals with idealistic situation? (a) Positive economics (b) Normative economics (c) Both positive and normative economics (d) None of the above 14. A rise in price of goods leads to fall in its quantity demanded. Thus, government showed cheek rise in prices. This statement refers to: (a) Positive economics (b) Normative economics (c) Both positive and normative economics (d) None of the above 15. Price theory deals with: (a) Product pricing (b) Factor Pricing (c) Welfare economics (d) All of the above

1.8 MCQs in Economics

16. Marco economics deals with: (a) Theory of distribution (b) Theory of income and employment (c) Theory of economic growth (d) All of the above 17. When we start with particular facts and then makes general theory, it is called: (a) Deductive method (b) Inductive method (c) Partial equilibrium method (d) None of the above 18. Examples of inductive method of economic theory can be: (a) Malthusian theory of population (b) Engel’s law (c) Law of demand (d) All of the above 19. Advantages of deductive method of economic theory can be: (a) Simple method (b) Universally applicable (c) Accurate result (d) All of the above 20. Merits of inductive method of economic theory can be: (a) Realistic and reasonable method (b) Verifies economic facts (c) Scientific method (d) All of the above 21. Disadvantages of inductive method can be: (a) Expensive method (c) Chances of personal bias of the investigators are present (b) Complex method (d) All of the above 22. Economic problem arises because: (a) Wants are unlimited (b) Resources are scare (c) Alternative uses of resources exist (d) All of the above

Microeconomics: An Introduction

1.9

23. Central problem of an economy can be: (a) What goods to produce and how much to produce (b) How to produce (c) For whom to produce (d) All of the above 24. Theory of distribution studies the problem of: (a) What goods to produce and how much to produce (b) How to produce (c) For whom to produce (d) All of the above 25. Theory of production studies the problem of: (a) What goods to produce and how much to produce (b) How to produce (c) For whom to produce (d) All of the above 26. Price theory studies the problem of: (a) What goods to produce and how much to produce (b) How to produce (c) For whom to produce (d) All of the above 27. Production possibility curved (PPC) is defined as different combination of goods and services that can be produced by whom when the resources are fully employed? (a) Firm (b) Industry (c) Economy (d) All of the above 28. Assumption of PPC is/are: (a) There are only two goods (b) Resources are not specific (c) Resources are fully employed (d) All of the above 29. Shape of PPC is: (a) Downward sloping concave to the origin (b) Downward sloping convex to the origin (c) Downward sloping straight line to the origin (d) All of the above

1.10

MCQs in Economics

30. Smooth PPC is based on the assumption that: (a) Infinite production possibilities exist (b) Limited production possibilities exist (c) Two production possibilities exist (d) None of the above 31. PPC is also called: (a) Opportunity cost curve (b) Transformation curve (c) Production possibility frontier (d) All of the above 32. If production of good X rises by 1 unit and that of good Y falls from 15 to 12.5 units then, marginal opportunity cost of X is: (a) 27.5 (b) 2.5 (c) 15 (d) 12.5 33. PPC can effectively explain the central problem of: (a) What to produce (b) How to produce (c) Economic growth (d) All of the above 34. PP¢ shifts rightwards to P1P1¢. It shows: (a) Improvement in technology in good X (b) Improvement in technology in good Y (c) Improvement in technology in both good X and good Y (d) Stagnation 35. If earthquake takes place, then what will happen to PPC? (a) Shift inward (b) Remains same (c) Shift outward (d) All of the above Use the figure below to answer Questions 36-39

Microeconomics: An Introduction

36. Trade off is shown by: (a) Point N to M (c) Point N to S

1.11

(b) Point R to N (d) Point R to S

37. Which point shows under utilisation of resources? (a) Point N (b) Point M (c) Point R (d) Point S 38. Which point is not attainable? (a) Point N (b) Point M (c) Point R (d) Point S 39. Slope of PPC between point N and M is: (a) 3 (b) 20 (c) 2.5

(d) 3.5

40. Price mechanism is: (a) Interaction of market forces of demand and supply to determine the price (b) A mechanism followed by producer is determine the price (c) A mechanism where both buyers and sellers exercise their bargaining power and then settle for a price (d) All of the above 41. Who gave ‘Invisible Hand’ theorem? (a) Robins (c) Karl Marx (b) Marshall (d) Adam Smith 42. Capitalism brings about: (a) Rapid economic growth (b) Maximum efficiency (c) More economic activity (d) All of the above 43. Demerits of capitalism is seen in: (a) Unequal distribution of income and wealth (b) Business instability (c) Consumer’s exploitation (d) All of the above 44. In a mixed economy, what is the motive of producer? (a) Profit (b) Society’s welfare (c) Both profit and society’s welfare (d) None of the above

1.12

MCQs in Economics

45. There is absence of role of government in: (a) Capitalist economy (b) Socialist economy (c) Mixed economy (d) Primitive economy 46. Capitalism is also called: (a) Command economy (c) Laissez-faire economy

(b) Planned economy (d) Perfectly competitive economy

47. Socialism is also called: (a) Free-market economy (c) Command economy

(b) Laissez-faire economy (d) Perfectly competitive economy

48. Socialism means: (a) No freedom to enterprise (b) Complete role of government (c) No competition (d) All of the above 49. Socialism brings about: (a) Optimum utilisation of resources (b) Satisfaction of consumer’s need (c) Equal distribution of income and wealth (d) All of the above 50. Demerit of socialism lies in: (a) Concentration of power in government hand (b) Bureaucratic set up (c) Wrong calculation of cost (d) All of the above 51. Mixed economy means: (a) Consumer’s sovereignty (b) Freedom of occupation (c) Competition in the private sector (d) All of the above 52. Who takes production decision in India? (a) Price mechanism (b) Government (c) Both price mechanism and government (d) None of the above

Microeconomics: An Introduction

53. Mixed economy means: (a) Stability (c) Maximises productivity

1.13

(b) Balanced development (d) All of the above

54. Demerits of mixed economy can be seen in: (a) Inefficiency (b) Corruption (c) Fear of nationalism (d) All of the above 55. Who said “Capitalism contain seeds of its own destruction”? (a) Karl Marx (b) Adam Smith (c) Ricardo (d) Samuelson 56. If PPC shifts to the left, it means: (a) Resource are destroyed (b) More unemployment (c) Use of outdated technology (d) All of the above 57. If PPC shifts to the right, it means: (a) Discovery of new stock (b) Advancement in technology (c) Generation of employment (d) All of the above

Solution 1. (d)

2. (b)

3. (a)

4. (d)

5. (d)

6. (a)

7. (b)

8. (c)

9. (a) 10. (d) 11. (a) 12. (b) 13. (b) 14. (c) 15. (d) 16. (d) 17. (b) 18. (d) 19. (d) 20. (d) 21. (d) 22. (d) 23. (d) 24. (c) 25. (b) 26. (a) 27. (c) 28. (d) 29. (a) 30. (a) 31. (d) 32. (b) 33. (d) 34. (c) 35. (a) 36. (a) 37. (c) 38. (d) 39. (a) 40. (a) 41. (d) 42. (d) 43. (d) 44. (c) 45. (a) 46. (c) 47. (c) 48. (d) 49. (d) 50. (d) 51. (d) 52. (c) 53. (d) 54. (d) 55. (a) 56. (d) 57. (d)

2. Law of Demand and Elasticity of Demand 3. Theories of Consumer Behaviour 4. Supply

chapter 2 Law of Demand and Elasticity of Demand

Topics Covered l Definition and Features of Demand l Factors Determining Demand and the Demand Function l The Law of Demand l Exceptions to the Law of Demand l From Individual Demand to Market Demand l Movement: Expansion or Contraction of Demand l Shift: Increase or Decrease in Demand l Difference Between Movement and Shift of the Demand Curve l Price Elasticity of Demand l Measurement of Price Elasticity of Demand l Income Elasticity of Demand l Cross Elasticity of Demand

2.4 MCQs in Economics

1. Demand definition is complete when we have data on: (a) Price, quantity and time (b) Income, quantity and time (c) Price, utility and time (d) Price, quantity and utility 2. By effective demand, we mean: (a) Both ability and willingness to buy a commodity (b) Willingness to buy a commodity (c) Ability to buy a commodity (d) Desire to own a commodity 3. Demand function is given as Dx = f (Px , P2, Y, T ). What does T stand for: (a) Taxes (b) Tastes (c) Both taxes and tastes (d) None of the above 4. Who gave ‘ceteris paribus’ assumption? (a) Marshall (c) Ricardo (b) Adam Smith (d) Walras 5. What does ‘ceteris paribus’ mean? (a) Other things remaining constant (b) Price of other goods remaining constant (c) Other things are simultaneously changing (d) None of the above 6. What kind of relationship exist between demand for a good and price of its substitute goods? (a) Direct (b) Inverse (c) No effect (d) Can be direct or inverse 7. What kind of relationship exist between price of a good and demand of its complementary good? (a) Direct (b) Inverse (c) No effect (d) Can be direct or inverse 8. What kind of relationship exist between income and demand of inferior good? (a) Direct (b) Inverse (c) No effect (d) Can be direct or inverse

Law of Demand and Elasticity of Demand 2.5

9. What kind of relationship exist between income and demand of a normal good? (a) Direct (b) Inverse (c) No effect (d) Can be direct or inverse 10. How will demand for a necessity behave with rise in income? (a) Initially the demand rises and then becomes constant (b) Initially the demand shows no change and then it rises (c) Rises (d) Falls 11. How is law of demand expressed functionally? (a) Dx = f (Px ), ceteris paribus (b) Dx = f (Pz ), ceteris paribus (c) Dx = f (Y ), ceteris paribus (d) Dx = f (T ), ceteris paribus 12. When demand curve is downward sloping , its slope is (a) Negative (b) Positive (c) Constant (d) Zero

:

13. As consumer has more and more units of a goods, its marginal : utility to him (a) Declines (b) Rises (c) Is zero (d) Is maximum 14. Income effect states that as price of a good falls, demand rises because there is rise in : (a) Money income (b) Real income (c) Relative price of other goods (d) Marginal utility 15. Substitution effect states that as price of a good falls, demand : rises because there is rise in (a) Money income (b) Real income (c) Relative price of other goods (d) Marginal utility 16. Giffen good is: (a) A inferior good (b) One with high negative income elasticity of demand (c) Consumed by low-paid workers (d) All of the above

2.6 MCQs in Economics

17. Veblan good is: (a) Good of status (b) Consumed by very high income group (c) Like diamonds (d) All of the above 18. Factor which affects market demand but not individual demand can be: (a) Number of consumers in the market (b) Age and sex composition of population (c) Distribution of income (d) All of the above 19. Law of demand does not hold in case of: (a) Emergency (b) Expectation of price rise (c) Conspicuous goods (d) All of the above 20. Contraction of demand is shown by: (a) Upward movement on the demand curve (b) Downward movement on the demand curve (c) Rightward shift of the demand curve (d) Leftward shift of the demand curve 21. Increase in demand is shown by: (a) Upward movement on the demand curve (b) Downward movement on the demand curve (c) Rightward shift of the demand curve (d) Leftward shift of the demand curve 22. Expansion of demand is shown by: (a) Upward movement on the demand curve (b) Downward movement on the demand curve (c) Rightward shift of the demand curve (d) Leftward shift of the demand curve 23. When same units are demanded at a higher price, it shows: (a) Increase in demand (b) Expansion in demand (c) Decrease in demand (d) Contraction in demand

Law of Demand and Elasticity of Demand 2.7

24. When there is fall in the price of complementary good and rise in the price of substitute good, it shows: (a) Increase in demand. (b) Expansion in demand. (c) Decrease in demand. (d) Contraction in demand. 25. Coefficient of elasticity of demand is negative. It means: (a) Consumers sometimes buy negative units of a commodity (b) Price and quantity demanded move in same direction (c) Law of demand holds (d) The two goods are complementary to each other 26. Ed = (a)

DQ P ◊ DP Q

Q (b) DP ◊ DQ P

(c) DP ◊ P DQ Q

(d)

DQ Q ◊ DP P

27. Demand is elastic when: (a) Price level is high (b) More substitutes are available (c) Income of the consumer is less (d) All of the above 28. The absolute value of the coefficient of elasticity of demand ranges from: (a) Zero to infinity (b) Minus infinity to plus infinity (c) Zero to infinity (d) One to infinity 29. The value of cross elasticity of demand ranges from: (a) Zero to infinity (b) Minus infinity to plus infinity (c) Zero to infinity (d) One to infinity 30. When cross elasticity of demand is zero, then two goods are: (a) Substitutes (b) Complements (c) Not related (d) Perfect complements

2.8 MCQs in Economics

31. When cross elasticity of demand is minus infinity, then two goods are: (a) Substitutes (b) Complements (c) Not related (d) Perfect complements 32. When cross elasticity of demand is positive, then two goods are: (a) Substitutes (b) Complements (c) Not related (d) Perfect complements 33. Cross elasticity of demand between two goods X and Z is given as: (a) e xz =

DQ x Pz ◊ DPz Q x

(b) e xz =

DQ x Px ◊ DPz Qz

(c) e xz =

DQ z Pz ◊ DPx Q x

(d) e xz =

DQ x Q x ◊ DPz Pz

34. Income elasticity is given as: (a) ey =

DQ y ◊ Dy Q

(b) ey =

Dy Q ◊ DQ y

(c) ey =

DQ Q ◊ Dy y

(d) ey =

Dy Q ◊ DQ y

35. When income elasticity of demand is greater than one, then the good is: (a) luxury (b) Necessity (c) Poor quality necessity (d) Inferior good 36. When income elasticity of demand is equal to zero, then the good is: (a) Luxury (b) Necessity (c) Poor quality necessity (d) Inferior good 37. When income elasticity of demand is between zero and one, the good is: (a) Luxury (b) Necessity (c) Poor quality necessity (d) Inferior good

Law of Demand and Elasticity of Demand 2.9

38. Geometric method of measuring point elasticity of demand is given by what ratio on the price axis? (a)

lower segment upper segment

(c) zero 1

(b)

upper segment lower segment

(d)

zero lower segment

39. If income of a household rises by 10% and demand rises by 40% : then income elasticity is equal to (a) 4 (b) 1 4 (c) 30 percent (d) None of the above 40. When income elasticity of demand is negative, the good is: (a) Luxury (b) Necessity (c) Poor quality necessity (d) Inferior good 41. Price elasticity of demand on a linear demand curve at the x-axis is equal to : (a) zero (b) one (c) infinity (d) 0 < Ed < 1 42. Price elasticity of demand on a linear demand curve at the y-axis : is equal to (a) Zero (b) One (c) Infinity (d) 0 < Ed < 1 43. Price elasticity of demand of a horizontal demand curve is called: (a) Perfectly elastic (b) Perfectly inelastic (c) Elastic (d) Inelastic 44. Price elasticity of demand of a vertical demand curve is called: (a) Perfectly elastic (b) Elastic (c) Inelastic (d) Perfectly inelastic 45. When percentage change in quantity demanded is more than the percentage change in price than demand curve is: (a) Flatter (b) Steeper (c) Rectangular (d) Horizontal 46. When percentage change in quantity demanded is less than the percentage change in price demand curve is: (a) Flatter (b) Steeper (c) Rectangular (d) Horizontal

2.10

MCQs in Economics

47. Ed = 1 in case of: (a) Luxuries (c) Necessities

(b) Normal goods (d) Essentials

48. Ed = • in case of: (a) Nuxuries (c) Necessities

(b) Normal goods (d) Perfect competition

49. Ed = 0 in case of: (a) Luxuries (c) Necessities

(b) Normal goods (d) Essentials

50. When the same pair of price and quantity figures give two different values of elasticity of demand, one must apply: (a) Outlay method (b) Arc method (c) Geometric method (d) None of the above

Solution 1. (a)

2. (a)

3. (b)

4. (a)

5. (a)

6. (a) If price of rice rises it would cause an increase in demand for wheat 7. (b) If price of petrol rises it would cause a fall in demand for car. 8. (b) As income rises, purchasing power rises and consumer substitutes superior goods for inferior good. Thus, demand for inferior goods fall. 9. (a) As income rises, consumer buys more of normal goods. 10. (a) 11. (a) 12. (a) 13. (a) It is called law of diminishing marginal utility. The law was given by Alfred Marshall. 14. (b) Real income is the purchasing power. It is obtained by dividing money income by the price of the commodity. 15. (c) 16. (d) 17. (d) 18. (d) 19. (d) 20. (a) It shows less quantity demanded at a higher price.

Law of Demand and Elasticity of Demand

2.11

21. (c) 22. (b) It shows more quantity demanded at a lower price. 23. (a) 24. (a) 25. (c) 26. (a) 27. (d) 28. (a) 29. (b) 30. (c) 31. (d) 32. (a) 33. (a) 34. (a) 35. (a) 36. (c) 37. (b) 38. (a) 39. (a) 40. (a) 41. (a) 42. (c) 43. (a) 44. (d) 45. (a) 46. (b) 47. (b) 48. (d) 49. (d) 50. (b)

chapter 3 Theories of Consumer Behaviour

Topics Covered l Marginal Utility Approach l Indifference Curve Theory l Comparison on Marginal Utility Theory with Indifference Curve Theory

3.2 MCQs in Economics

1. In Marginal utility theory, marginal utility of money is: (a) Rising (b) Constant (c) Decreasing (d) Rises and then falls 2. In Marginal utility theory, utility is an: (a) Ordinal concept (b) Cardinal concept (c) Both ordinal and cardinal concept (d) None of the above 3. As the consumer has more units of a commodity, his total utility from the commodity: (a) Increases less than in proportion, reaches a maximum and then falls (b) Increases less than in proportion and then falls (c) Increases more than in proportion and then reaches a maximum (d) Falls, becomes zero and then negative 4. MU of the commodity when no commodity is consumed is: (a) Maximum (b) Falling (c) Constant (d) Rising 5. MU of the commodity becomes negative when TU of the commodity is: (a) Rising (b) Constant (c) Falling (d) Zero 6. When MU of the commodity is zero, slope of TU curve is: (a) Zero (b) Rising (c) Falling (d) Constant 7. Slope of TU curve is called: (a) Marginal utility (b) Utility (c) Average utility (d) None of the above 8. Saturation point means: (a) TU is rising, and MU is falling (b) TU is falling and MU is negative (c) TU is maximum and MU is zero (d) Falling MU curve 9. Falling MU curve shows which law? (a) Law of diminishing returns (b) Law of diminishing marginal rate of substitution

Theories of Consumer Behaviour 3.3

(c) Law of diminishing marginal utility (d) None of the above 10. If consumption of the good is not continuous or there are varieties in the good then which law withhold: (a) Law of diminishing marginal utility (b) Law of increasing marginal utility (c) Law of diminishing returns (d) Law of constant returns 11. Consumer surplus is the difference between: (a) Amount consumer is willing to pay minus amount actually paid by the consumer (b) Amount consumer actually paid minus the amount consumer is wiling to pay (c) Amount consumer actually paid minus the amount charged by the seller (d) Amount consumer is willing to pay minus the amount producer is wanting 12. Marshall’s consumer surplus is the area between: (a) Demand curve and the price axis below the market price (b) MU curve and the market price (c) Demand curve and the price axis above the market price (d) None of the above 13. The negative portion of MU curve: (a) Is a part of the demand curve (b) Is not a part of the demand curve (c) Is sometimes a part of the demand curve (d) MU curve is not related to demand curve 14. When MU is falling, TU is: (a) Rising (c) Not changing

(b) Falling (d) Maximum

15. In MU theory, we assume other things are: (a) Constant (b) Changing (c) Changes in the long-run (d) None of the above

3.4 MCQs in Economics

16. MRS is defined as: (a) Amount of good Y given up in exchange for good X such that total utility is constant (b) Amount of good X given up in exchange for good Y such that total utility is constant (c) Amount of good Y given up in exchange for good X such that total utility rises (d) Amount of good Y given up in exchange for good X 17. Indifference mean: (a) X is preferred to Y (b) Y is preferred to X (c) X and Y are equally preferred (d) None of the above 18. Scale of preference of a consumer is independent of: (a) Market price (b) Scale of preference of other consumer (c) Income of the consumer (d) All the above 19. MRS is given by. (a) DX DY

(b) DX – DY (c) DY DX

(d) DY – DX.

20. Diminishing MRS means: (a) Consumer wants to give up lesser units of Y in exchange for good X (b) Consumer wants to give up more units of Y in exchange for good X (c) Consumer wants to give up same units of Y in exchange for good X (d) None of the above 21. Smoothness of indifference curve means: (a) X and Y are substitutes of each other (b) X and Y can be consumed in fixed proportions (c) Perfect divisibility of two goods (d) Perfect non-divisibility of two goods

Theories of Consumer Behaviour 3.5

22. Higher Indifference curve means: (a) Consumer has more income (b) Price of goods have reduced (c) Higher utility level (d) All of the above 23. A downward sloping curve can have the following shape: (a) Convex (b) Concave (c) Straight line (d) All of the above 24. A straight downward sloping indifference curve means: (a) MRS is constant (b) MRS is increasing (c) MRS is decreasing (d) MRS is zero 25. Decreasing slope of indifference curve is explained by: (a) Law of diminishing marginal returns (b) Law of diminishing MRS (c) Law of demand (d) Law of constant MRS 26. Budget set is: (a) Right angled triangle formed by the budget line with the axes (b) All points on the budget line (c) Points inside the budget line (d) Points on y-axis from where budget line starts and the point on x-axis where budget line ends 27. While deriving consumer’s equilibrium, what is given? (a) Income of the consumer (b) Price of the commodities (c) Both income and price (d) None of the above 28. Point A is: (a) Attainable (b) Not attainable (c) Desirable and attainable (d) Desirable and not attainable

3.6 MCQs in Economics

29. When MRS is constant, X and Y are: (a) Not related (b) Perfect substitutes (c) Perfect complements (d) Inferior goods 30. Upward sloping demand curve can be explained by: (a) Marginal utility theory (b) Indifference curve theory (c) Both the above theories (d) None of the above 31. Marginal utility theory can derive the demand curve which is: (a) Downward sloping (b) Upward sloping (c) L-Shaped (d) All of the above 32. When two goods are perfect complements, then elasticity of substitution between the two goods is: (a) Infinity (b) One (c) Zero (d) Between zero and infinity 33. When MRS of X for Y is equal to the ratio between the price of the goods, then it is shown by: (a) Point on highest indifference curves (b) Point on budget line (c) Equilibrium point (d) All of the above 34. To derive the demand curve, we change the price and see its effect on quantity demanded. When price is changed, it generates which two effects? (a) Price and income effects (b) Price and substitution effects (c) Income and substitution effects (d) None of the above 35. Which of the following is the property of indifference curves? (a) They are downward sloping (b) They are convex to the origin (c) They are non-intersecting (d) All of the above

Theories of Consumer Behaviour 3.7

36. If a consumer is willing to pay Rs 20 for an apple and is able to buy it for Rs. 15, then the consumer surplus is: (a) Rs. 35 (b) Rs. 15 (c) Rs. 5 (d) Rs. 20 37. The common assumption of marginal utility and indifference curve theories is: (a) Consistency (b) Transitivity (c) Rationality (d) More is better 38. Which theory assumes ordinality of utility? (a) Indifference curve theory (b) Marginal utility theory (c) None of the above (d) Both (a) and (b) 39. When MRS is rising, what shape will indifference curve take? (a) Convex to the origin (b) Concave (c) Straight line (d) Rising 40. When tax is raised, consumer surplus: (a) Falls (b) Rises (c) Remain unchanged (d) Becomes zero

Solution 1. (b) It is the assumption of marginal utility theory that marginal utility of money is constant. 2. (b) Utility is a cardinal concept in marginal utility theory. It means it can be measured in money units. 3. (a) 4. (a) It is because the expected utility of the consumer when he gets the first unit of the commodity is maximum. 5. (c) 6. (a) It is because MU is the slope of TU curve. 7. (a)

8. (c)

9. (c)

3.8 MCQs in Economics

10. (b) It is because if a consumer can have the commodity after a gap of few hours and there is also variety in the commodity then his MU from additional units of the commodity will increase. 11. (a) 12. (c) 13. (b) It is because negative quantities are not demanded. 14. (a) 15. (a) 16. (a) It is because MRS = DY DX 17. (c) That is, both goods X and Y gives equal satisfaction to the consumer. 18. (d) consumer’s preference does not get change if there are changes in price, income or scale of preference of other consumers. 19. (c) 20. (a) Beause as the consumer moves along a curve, Y becomes a scarce commodity and X becomes an abundant commodity. The subjective worth of abundant good X declines and that of scarce good Y rises. 21. (c) This is the basic assumption behind smoothness of all curves in economics. 22. (c) 23. (d) 24. (a) 25. (b) 26. (a) 27. (c) These are constraints on which budget line is developed. 28. (d) Desirable because it shows more utility and unattainable because the budget line does not touch it. 29. (b) When two goods are perfect substitutes then its elasticity of substitution (es ) is infinity. es is infinity when there is no change in MRS. 30. (b) Upward sloping demand curve occurs in case of giffen goods. Indifference curve theory can derive the demand curve for giffen goods. 31. (a) In MU theory, the demand curve derived is downward sloping which exists in case of normal goods.

Theories of Consumer Behaviour 3.9

32. (c) 33. (c) Since equilibrium condition is: MRSXY =

PX PY

34. (c) Price effect = Substitution effect + Income effect. 35. (d) 36. (c) Consumer surplus = amount consumer is willing to pay – amount actually paid = Rs. 20 – Rs. 15 = Rs. 5 37. (c) 38. (a) 39. (b) 40. (a) When tax is raised, price of the commodity rises and consumer has to actually pay greater amount of money to buy the commodity. Thus, consumer surplus falls.

chapter 4 Supply

Topics Covered l Concept of Supply l Factors Determining Supply l The Law of Supply l From Individual Supply to Market Supply l Movement: Expansion or Contraction of Supply l Shift: Increase or Decrease in Supply l Difference Between Movement and Shift of the Supply Curve l Elasticity of Supply l Measurement of Elasticity of Supply

4.2 MCQs in Economics

1. Stock of a commodity is the: (a) Total quantity that is available in a market at a certain time (b) Total quantity that is available with wholesalers at a certain time (c) Total quantity that is available with stockists at a certain time (d) Total quantity that is available at a certain price 2. Supply is that part of stock which: (a) Seller is ready to sell at a certain price during a certain time (b) Seller is ready to sell (c) Wholesaler is ready to sell to retailers (d) Wholesaler is ready to sell to buyers 3. Supply function is a functional relationship between quantity supplied of a commodity and : (a) Factors affecting supply (b) Price of the commodity (c) State of technology (d) Government policy 4. Law of supply is functionally given as: (a) Sx = f (Px ), ceteris paribus (b) Sx = f (P2 ), ceteris paribus (c) Sx = f (T ), ceteris paribus (d) Sx = f (C ), ceteris paribus 5. What is constant in the law of supply? (a) Price of related goods (b) State of technology (c) Cost of production (d) All of the above 6. When supply curve is upward sloping, its slope is (a) Positive (b) Negative (c) First positive then negative (d) Zero 7. Market supply curve is curve: (a) Horizontal (b) Vertical

:

summation of individual supply

Supply

4.3

(c) Can be both horizontal or vertical (d) None of the above 8. Movement along the supply curve is also called: (a) Change in supply (b) Change in quantity supplied (c) Contraction in supply (d) Income in supply 9. An upward movement along a supply curve shows: (a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply 10. A rightward shift in supply curve shows: (a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply 11. When less quantity is supplied at a lower price, it shows: (a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply 12. When same quantity is supplied at a higher price, it shows: (a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply 13. When price of substitutes and cost of production rises, it leads to: (a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply 14. When there is fall in expected price of the good and favourable changes in government policy, it leads to: (a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply 15. Who developed the concept of elasticity of supply? (a) Alfred Marshall (b) A.C. Pigou (c) Adam Smith (d) Robbins 16. Elasticity of supply is given by the formula: (a)

DQ P ◊ DP Q

Q (b) DP ◊ DQ P

(c)

DQ Q ◊ DP P

(d)

DQ DP

4.4 MCQs in Economics

17. Slope of supply curve is given by the formula: Q DQ (a) (b) DP (c) P (d) Q DQ p DP 18. Relationship between slope and elasticity of supply is: (a) ES =

1 ◊P Slope Q

(b) ES = Slope ◊

(c) ES =

1 ◊Q Slope P

(d) ES = Slope

Q p

19. The value of elasticity of supply ranges from: (a) Zero to infinity (c) Minus infinity to plus infinity (b) One to infinity (d) Zero to minus infinity. 20. When supply curve is vertical, ES = (a) Zero (b) 1 (c) •

? (d) ES > 1

21. When supply curve is horizontal, ES = (a) Zero (b) 1 (c) •

? (d) ES > 1

22. If price of substitute goods fall, then it will lead to: (a) Increase in supply (b) Decrease in supply (c) No change in supply (d) None of the above 23. When to a change in price there is lesser change in quantity supplied then supply curve is: (a) Upward sloping originating from x-axis (b) Upward sloping originating from origin (c) Upward sloping originating from y-axis (d) Horizontal 24. When to a change in price there is equal change in quantity supplied then supply curve is: (a) Upward sloping originating from x-axis (b) Upward sloping originating from origin (c) Upward sloping originating from y-axis (d) Horizontal 25. When to a change in price there is more change in quantity supplied then supply curve is: (a) Upward sloping originating from x-axis (b) Upward sloping originating from origin

Supply

4.5

(c) Upward sloping originating from y-axis (d) Horizontal 26. Arc elasticity of supply is given by the formula: (a)

q1 - q 2 p + p2 ¥ 1 q1 + q 2 p1 - p 2

q 1 + q 2 p1 + p 2 (b) q - q ¥ p - p 1 2 1 2

(c)

q 2 - q 1 p 2 - p1 ¥ q 2 + q 1 p 2 - p1

(d)

p1 - p 2 q 1 + q 2 ¥ p1 + p2 q1 - q 2

27. Let price of rice rise for Rs 20 to Rs 40 per kg and quantity supplied rise from 10 kg to 15 kg in a month. Then, ES is = ? (a) 0.6 (b) 0.8 (c) 0.5 (d) 1 28. Let Q = –40 + 10 p be the supply function then calculate arc ES between price of Rs 10 and Rs 12: (a) 4 (b) 1.3 (c) 1.57 (d) 1 29. If price of a good falls from Rs 25 to Rs 20, supply falls from 180 units to 80 units. Calculate ES.: (a) 2.5 (b) 2.78 (c) 3 (d) 3.5 30. Let ES = 5, P = Rs 60, new price = Rs 100, change in quantity supplied = 20 units. Find original quantity supplied: (a) 6 units (b) 26 units (c) 15 units (d) 8 units 31. If value of ES > 1, it is called: (a) Elastic supply (b) Inelastic supply (c) Perfectly elastic supply (d) Perfectly inelastic supply 32. If value of ES < 1, it is called: (a) Elastic supply (b) Inelastic supply (c) Perfectly elastic supply (d) Perfectly inelastic supply 33. Price of a good falls from Rs 15 to Rs 10 and the supply decreases from 100 units to 50 units. Calculate ES : (a) 2 (b) 2.5 (c) 1.5 (d) 1. 34. A seller of potatoes sells 80 quintals a day when the price of potatoes is Rs 4 per kilogram. The elasticity of supply of potatoes is known to be 2. How much quantity will this seller supply when the price rises to Rs 5 per kilogram? (a) 120 quintals (b) 80 quintals (c) 40 quintals (d) 60 quintals

4.6 MCQs in Economics

35. The co-efficient of elasticity of supply of a commodity is 3. A seller supplies 20 units of this commodity at a price of Rs 8 per unit. How much quantity of this commodity will the seller supply when price rises by Rs 2 per unit? (a) 35 units (b) 15 units (c) 20 units (d) 40 units The supply schedule of a commodity changes as follows in two cases. Answer question 36 and 37 from the table. Price (Rs.) 1 2 3 4 5

Case A: Quantity supplied after change 20 40 60 80 100

Case B: Quantity supplied after change 0 20 40 60 80

36. Calculate elasticity of supply when price rises from Rs 2 to Rs 3 in Case A: (a) 1 (b) 1.5 (c) 2 (d) 2.5. 37. Calculate elasticity of supply when price rises from Rs 2 to Rs 3 in Case B: (a) 1 (b) 2 (c) 3 (d) 2.5. 38. Price elasticity of supply of good is 5. A producer sells 500 units of this good at Rs.5 per unit. How much will he be willing to sell at the price of Rs.6 per unit? (a) 1000 units (b) 500 units (c) 600 units (d) 700 units 39. A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve? (a) 2 (b) 1 (c) 3 (d) 4 40. At the market price of Rs 10, a firm supplies 4 units of output. The market price increases to Rs 30. The price elasticity of the firm’s supply is 1.25. What quantity will the firm supply at the new price? (a) 14 units (b) 10 units (c) 4 units (d) 20 units

Supply

4.7

Solution 1. (a) 9. (c)

2. (a)

3. (a)

4. (a)

5. (d)

6. (a)

7. (a)

8. (b)

10. (d) 11. (a)

12. (b)

13. (b) There is leftward shift in supply curve because factors other than PX are changing adversely 14. (d) 15. (a) 16. (a) 17. (b) 18. (a) 19. (a) 20. (a) 21. (c) 22. (a) 23. (a) It is case of inelastic supply or ES < 1

4.8 MCQs in Economics

24. (b) 25. (c) 26. (a) 27. (a) ES =

q1 - q 2 p + p2 ¥ 1 q1 + q 2 p1 - p 2

=

10 – 15 20 + 40 ¥ 10 + 15 20 - 40

5 3 = 0.6 = - ¥ 60 = 25 -20 5 28. (c) When P = Rs 10, Q = –40 + 10(10) = –40 + 100 = 60 units When P = Rs 12, Q = –40 + 10(12) = –40 + 120 = 80 units ES =

q1 - q 2 p + p2 ¥ 1 q1 + q 2 p1 - p 2

=

60 - 80 10 + 12 ¥ 60 + 80 10 - 12

= -20 ¥ 22 = 11 = 1.57 140 -2 7 29. (b) ES =

DQ P ◊ DP Q

25 = 100 ◊ 5 180 = 2.78 30. (a)

ES =

DQ P ◊ DP Q

5=

20 ◊ 60 40 Q

fi Q = 20 ◊ 60 40 5 fi Q= 6 \ Original quality supplied = 6 units 31. (a) 32. (b) 33. (c)

Q = 100 Q1 = 50 DQ = 50 Thus, ES =

P = 15 P1 = 10 DP = 5

DQ P 50 15 ¥ = ¥ = 1.5 5 100 DP Q

Supply

34. (a) Given ES = 2 P = Rs 4 per kg Q = 80 quintals = 8,000 kg P1 = Rs 5 per kg Q1 = ? DP = Re 1 The formula for calculating ES is DQ P ◊ ES = DP Q \

DQ ◊ 4 1 8000 16,000 = 4.DQ

2=

16,000 = 4,000 kg = 40 quintals 4 Thus, new quantity which is Q1 = Q + DQ = 80 + 40 = 120 quintals or

DQ =

35. (a) Given, Q = 20 units P = Rs 8 per unit DP = Rs 2 per unit Es = 3 Let change in supply = DQ Thus, we have DQ P ◊ ES = DP Q or or

DQ 8 ◊ 2 20 8.DQ = 120

or \ 36. (a) Given

or or

3=

DQ = 120 = 15 units 8 Q1 = Q + DQ = 20 + 15 = 35 units Q = 40 units Q1 = 60 units DQ = 20 units DQ P ◊ ES = DP Q ES = 20 ◊ 2 1 40 ES = 1

P = Rs 2 P1 = Rs 3 \ DP = Re 1

4.9

4.10

MCQs in Economics

37. (b) Given \

or

Q = 20 units Q1 = 40 units DQ = 20 units ES = 20 ◊ 2 1 20 ES = 2

P = Rs 2 P1 = Rs 3 \ DP = Re 1

38. (a) Given the values ES = 5 P = Rs 5 Q = 500 units P1 = Rs 6 Q1 = ? \ DP = Re 1 Substituting them in the formula of ES, we obtain:

DQ 5 ◊ 1 500 DQ = 500 \ Q1 = Q + DQ = 500 + 500 = 1000 units 5=

fi

39. (a) When P = 10, R (Revenue) or P ¥ Q = 50 Q = 50 = 5 10 when P1 = 15, R1 or P1 ¥ Q1 = 150

fi

fi \

150 15 DQ ES = DP

Q1 =

= 10

◊P Q

= 5 ◊ 10 = 2 5 5 40. (a) Given

\

P = Rs 10 P1 = Rs 30 DP = Rs 20 DQ P ◊ ES = DP Q

Q = 4 units Q1 = ?

DQ 10 ◊ 20 4 fi DQ = 1.25 ¥ 8 = 10 units The new quantiy supplied will be: Q1 = DQ + Q = 10 + 4 = 14 units

1.25 =

ES = 1.25

5. Theory of Production 6. Theory of Cost

chapter 5 Theory of Production

Topics Covered l What is Production? l Land l Labour l Capital l Capital Formation and Stages of Capital Formation l Entrepreneur l Production Function l Law of Variable Proportions l Law of Returns to Scale l Economies and Diseconomies of Scale l Difference Between Returns to a Factor and Returns to Scale

5.4 MCQs in Economics

1. Creation of economic utility can be: (a) Form utility (b) Time utility (c) Place utility (d) All of the above 2. Extraction from earth and transportation are examples of: (a) Form utility (b) Time utility (c) Place utility (d) All of the above 3. Storage of food grains and canning of fruits are examples of: (a) Form utility (b) Time utility (c) Place utility (d) All of the above 4. Manufacturing process is an example of: (a) Form utility (b) Time utility (c) Place utility (d) All of the above. 5. Voluntary services is an example of: (a) Form utility (b) Time utility (c) Place utility (d) All of the above 6. Production process determines: (a) Standard of living of people (b) Welfare of the society (c) Prosperity of a nation (d) All of the above 7. Goods and services which help in the production process are called: (a) Raw materials (b) Factors of production (c) Both raw materials and factors of production (d) Active inputs 8. Factors of production can be: (a) Land (b) Labour (c) Organisation (d) All of the above 9. Land is a (a) Primary (c) Secondary

factor of production: (b) Derived (d) Active

Theory of Production

10. Land include: (a) Heat (c) Light

(b) Air (d) All of the above

11. Supply of land is: (a) Variable (c) Perfectly inelastic

(b) Inelastic (d) Elastic

5.5

12. Feature of land is: (a) It cannot be destroyed (b) It is a static factor (c) It has no cost of production (d) All of the above 13. When land differs in fertility, it is called: (a) Heterogeneity of land (b) Homogeneity of land (c) Extensive cultivation of land (d) All of the above 14. Labour is defined as: (a) Mental exertion to create or produce goods and services (b) Physical exertion to create or produce goods and services (c) Both mental and physical exertion to create and produce goods and services (d) None of the above 15. Feature of labour: (a) It cannot be stored (b) Labourer has to work in person (c) Labourer sells his service (d) All of the above 16. Efficiency of labour depends upon: (a) Skill (b) Physical strength (c) Training (d) All of the above 17. Labour has to make a choice between: (a) Work and money (b) Money and leisure (c) Work and leisure (d) None of the above

5.6 MCQs in Economics

18. Labour can move between: (a) Jobs (b) Places (c) Both between jobs and places (d) None of the above 19. As wage rises, work hours reduces. It is given by: (a) Substitution effect (b) Income effect (c) Output effect (d) Profit effect 20. As wage rises, work hour rises. It is given by: (a) Substitution effect (b) Income effect (c) Output effect (d) Profit effect 21. An upward sloping supply curve of labour means: (a) Substitution effect = Income effect (b) Substitution effect > Income effect (c) Substitution effect < Income effect (d) None of the above 22. When supply curve of labour is backward bending, it means: (a) Substitution effect = Income effect (b) Substitution effect > Income effect (c) Substitution effect < Income effect (d) None of the above 23. Capital include: (a) Producer goods (c) Consumer goods

(b) Inventory of material goods (d) All of the above

24. Building, bridges and equipments are an example of: (a) Physical capital (b) Human capital (c) Circulating capital (d) Floating capital 25. Education, better skill, training and good health are examples of: (a) Physical capital (b) Human capital (c) Circulating capital (d) Floating capital 26. Capital is defined as: (a) All manmade goods used for further production of wealth (b) All natural resources used for further production of wealth

Theory of Production

5.7

(c) All inventories used for further production of wealth (d) All human capital used for further production of wealth 27. What is the difference between capital and income? (a) Capital is a stock and income is a flow (b) All capital is not income (c) Capital is a flow and income is a stock (d) None of the above 28. Capital formation is defined as surplus of: (a) Production over consumption in an accounting year (b) Consumption over production in an accounting year (c) Investment over production in an accounting year (d) Investment over consumption in an accounting year 29. Capital formation leads to: (a) More productive capacity of an economy (b) More employment opportunities (c) More growth of an economy (d) All of the above 30. What should be done after savings have been created? (a) Investment of savings (b) Mobilisation of savings (c) Both investment and mobilisation of savings (d) None of the above 31. Savings can be done by: (a) Individuals (c) Government

(b) Corporate sector (d) All of the above

32. Willingness to save by a household depends upon: (a) Income (b) Desire to earn rate of interest (c) Farsightedness (d) All of the above 33. Savings by government depends upon: (a) Finance in social overheads (b) Finance in economic overheads (c) Finance required to control inflation (d) All of the above

5.8 MCQs in Economics

34. Entrepreneur is a person who is a: (a) Organiser (b) Manager (c) Risk taker (d) All of the above 35. Function of entrepreneur can be: (a) To initiate a business enterprise (b) To take advantages of changes in a dynamic economy (c) To bear uncertainties (d) All of the above 36. Production function means: (a) Physical relationship between inputs used and output (b) Technical relationship between inputs used and output (c) Financial relationship between inputs used and output (d) Both physical and technical relationship between inputs used and output 37. Short-run production function means: (a) At least one factor is in fixed supply (b) Two factor are in fixed supply (c) All factors are in fixed supply (d) One factor is in variable supply 38. When TP is falling, then MP is: (a) Falling (b) Negative (c) Zero

(d) Maximum

39. When TP is maximum, MP is: (a) Falling (b) Negative (c) Zero

(d) Maximum

40. When TP is at its point of inflexion, the MP is: (a) Falling (b) Negative (c) Zero (d) Maximum 41. When AP = MP, AP is: (a) Falling (b) Negative (c) Zero

(d) Maximum

42. Law of Variable Proportions holds when: (a) State of technology is same (b) All units of variable factor are homogeneous (c) There is at least one fixed factor (d) All of the above

Theory of Production

5.9

43. Stage II of law of Variable Proportions is called: (a) Diminishing returns (b) Decreasing returns (c) Falling returns (d) Negative returns 44. In stage II of law of Variable Proportions, both AP and MP are: (a) Falling but positive (b) Rising (c) Falling and become negative (d) None of the above 45. Marketing economies arises because a large firm: (a) Has bargaining power (b) Can grant margins to wholesalers (c) Can take up advertising (d) All of the above 46. Technical economies can be: (a) Economies of superior techniques (b) Economies of increased dimensions (c) Economies of linked processes (d) All of the above 47. Decreasing return to scale occurs when: (a) Output falls (b) Output rises in less than proportion to increase in inputs (c) Returns are decreasing because inputs are not there (d) None of the above 48. Returns to scale occur: (a) In the long-run (b) When all inputs are increased (c) When the increase in inputs is in the same proportion (d) All of the above 49. Which is the best stage in returns to scale: (a) Increasing returns (b) Constant returns (c) Decreasing returns (d) None of the above

5.10

MCQs in Economics

50. Which is the best stage in law of Variable Proportions: (a) Increasing returns (b) Diminishing returns (c) Constant returns (d) Negative returns

Solution 1. (a)

2. (c)

3. (b)

4. (a)

5. (d)

6. (d)

7. (b)

8. (d)

9. (a) 10. (d) Land is a primary factor which includes besides physical territory, all natural resources such as water, sunshine, rainfalls, wind, sea, air, heat, light, minerals, etc. 11. (c) Land is a gift of god. It’s supply is perfectly inelastic. Man cannot increase its supply. 12 (d) 13. (a) Land differs in fertility. Two pieces of land possess different fertilities. 14. (c) 15. (d) 16. (d) 17. (c) 18. (c) It is called occupational and geographical mobility of labour. The figure will answer questions 19 to 22. 19. (b)

20. (a) 21. (b) It means as wage rate rises, supply of labour rises 22. (c) 23. (d) 24. (a) 25. (b) 26. (a) 27. (a) 28. (a) 29. (a) 30. (b) 31. (d) 32. (d) 33. (d) 34. (d) 35. (d) 36. (d) 37. (a)

Theory of Production

Figure will help to answer questions 38 to 41.

38. (b) 39. (c) 40. (d) 41. (d) 42. (d) 43. (a) 44. (a)

45. (d) 46. (a) 47. (b) 48. (d) 49. (d) 50. (b)

5.11

chapter 6 Theory of Cost

Topics Covered l Cost Concepts

l

Short-Run Cost Curves

6.2 MCQs in Economics

1. Production function together with determines the cost of the commodity: (a) Profit margin (b) Factor prices (c) Depreciation charges (d) All of the above 2. Cost of a commodity together with determines price of the commodity: (a) Profit margin (b) Factor prices (c) Depreciation charges (d) All of the above 3. The supply curve together with determines equilibrium price and quantity: (a) Demand curve (b) Cost of production (c) Profit margin (d) Production function 4. Cost functions are derived from (a) Price theory (b) Production function (c) Demand function (d) None of the above 5. While drawing cost curves, what is held constant? (a) State of technology (b) Price of factor (c) Both state of technology and price of factors (d) None of the above 6. Cost of next best alternatives opportunity given up is called: (a) Outlay cost (b) Opportunity cost (c) Explicit cost (d) Implicit cost 7.

cost is a payment concept (a) Explicit (b) Implicit (c) Opportunity (d) None of the above

8. Explicit cost is also the: (a) Accounting cost (c) Outlay cost

(b) Direct cost (d) All of the above

9. Accounting cost + normal return on capital invested by an entrepreneur himself = (a) Explicit cost (b) Economic cost (c) Imputed cost (d) Direct cost

Theory of Cost 6.3

10. Fixed cost is also called: (a) Sunk cost (c) Overhead cost

(b) Supplementary cost (d) All of the above

11. Fixed cost is like: (a) Overhead expenses (b) Salaries (c) Depreciation of machinery (d) All of the above 12. TC curve is shaped starting from (a) Inverse–S, origin (b) Inverse–S, total fixed cost level (c) Straight line, average fixed cost level (d) Straight line, total fixed cost level

.

13. AVC is defined as: (a) Variable cost per unit of output produced (b) Cost of one unit of output produced (c) Additional cost of one unit of output produced (d) None of the above 14. When AC = MC, AC is (a) Minimum (b) Falling

. (c) Rising

(d) Maximum

15. Total cost at zero level of output will be = ? (a) TFC (b) TVC (c) AC (d) AFC 16. MC curve is (a) L-shaped (c) U-shaped

shaped. (b) Straight line (d) Inverse S-shaped

17. Reason for the shape of MC curve is: (a) Law of Variable Proportions (b) Returns to Scale (c) Law of diminishing cost (d) Law of increasing cost 18. There is a range when AC is falling and . (a) MC is rising (b) TC is rising (c) AVC is constant (d) None of the above

6.4 MCQs in Economics

19. The distance between TVC and TC is (a) Vertical, TFC (b) Horizontal, TFC (c) Horizontal, AFC (d) Vertical, AFC 20. How many costs exist in the long-run ? (a) 1 (b) 3 (c) 2

(d) 7

21. How many costs exist in the short-run? (a) 1 (b) 3 (c) 2

(d) 7

.

22. What is reserve capacity? (a) It is the built-in-capacity to produce at minimum cost a range of output (b) It is the difference between equilibrium output and least cost output (c) It is the capacity of a plant to produce (d) All of the above 23. What happens when the most appropriate plant size is not built? (a) Cost rises (b) Production falls (c) Profit rises (d) All of the above 24. Any point above long-run AC is . (a) Showing more cost (c) Inefficient (b) Attainable (d) All of the above 25. Long-run AC curve is also called: (a) Planning curve (b) Envelope curve (c) Cost frontier (d) All of the above From the Table given below, answer question 26 to Question 31 Units 0 1 2 3

TC 80 100 118 140

26. What is the value of TFC when 1 unit of output is produced? (a) 100 (b) 80 (c) 10 (d) 50 27. What is TVC when 1 unit of output is produced? (a) 20 (b) 30 (c) 38 (d) 60

Theory of Cost 6.5

28. What is the value of AFC when 2 units of output are produced? (a) 80 (b) 100 (c) 40 (d) 0 29. What is the value of AVC when 3 units of output are produced? (a) 20 (b) 19 (c) 30 (d) 3 30. What is the value of MC when 2 units of output are produced? (a) 18 (b) 20 (c) 22 (d) 24 31. What is the value of TVC when 3 units of output are produced? (a) 60 (b) 20 (c) 38 (d) 30 32. (AC – AVC) ¥ output = (a) TFC (b) AC

? (c) AFC

(d) TVC

33. When long-run AC is falling, it is tangent to short-run AC curve: (a) Falling portion (b) Rising portion (c) Minimum point (d) Can be any of the situation given above.

of the

34. When long-run AC is minimum, it is tangent to short run AC curve: (a) Falling portion (b) Rising portion (c) Minimum point (d) Can be any of the situation given above.

of the

35. When long-run AC is rising, it is due to: (a) Law of variable proportion (b) Decreasing returns (c) Diminishing returns (d) Negative returns 36. Suppose a correct choice is made in selecting the plant size to produce the commodity. It will lead to: (a) Less cost (b) More profit (c) Efficiency (d) All of the above

6.6 MCQs in Economics

37. When both AC and MC are falling, (a) AC (b) MC (c) AVC

falls at a faster rate. (d) AFC

38. When both AC and MC are rising, (a) AC (b) MC (c) AVC

rises at a faster rate: (d) AFC

39. AC cannot cut AVC because: (a) AC includes AFC (b) AFC is a rectangular hyperbola (c) Both the above points (d) None of the above 40. Which costs are absent in the long-run? (a) AFC (b) TFC (c) Both AFC and TFC (d) TVC

Solution 1. (b)

2. (a)

3. (a)

4. (b)

9. (b) 10. (d) 11. (d) 12. (b)

13. (a) 14. (a) 15. (a) 16. (c) 17. (a)

5. (c)

6. (b)

7. (a)

8. (d)

Theory of Cost 6.7

18. (a)

19. (a)

20. (b) These are long-run AC, long-run MC and long run TC 21. (d) These are TC, TFC, TVC, AC, AFC, AVC and MC 22. (a) 23. (a) 24. (d) 25. (d) In the Table, we have the following calculation Output 0 1 2 3

TC (Rs) 80 100 118 140

TFC (Rs) 80 80 80 80

AFC (Rs) ** 80 40 26.67

TVC (Rs) 0 20 38 60

AVC (Rs) — 20 19 20

26. (b) 27. (a) 28. (c) 29. (a) 30. (a) 31. (a)

MC (Rs) — 20 18 22

6.8 MCQs in Economics

32. (a) It is because TFC = AFC ¥ output See the figure for question 33 and 34

33. (a) 34. (c) 35. (b) 36. (d) For question 37, 38 see the figure

37. (b) 38. (b)

Theory of Cost 6.9

For question 39 see the figure.

39. (c) 40. (c)

7. Meaning and Types of Markets 8. Determination of Price 9. Price-output Determination under Different Market Forms

chapter 7 Meaning and Types of Markets

Topics Covered l Meaning of Market l Extent of Market l Value and Price l Classification of Market Structures l Concept of Revenue l Behavioural Principles

7.4 MCQs in Economics

1. Durable goods will have: (a) Wider market (c) Local market

(b) Narrow market (d) State level market

2. Perishable goods will have a: (a) Wider market (b) Narrow market (c) International (d) State level market 3. A commodity which is less bulky and expensive will have a: (a) Wider market (b) Narrow market (c) Local market (d) State level market 4. If the size of production expands, it will have a: (a) Wider market (b) Narrow market (c) Local market (d) State level market 5. If the commodities have universal demand, it will have a: (a) Wider market (b) Narrow market (c) Local market (d) State level market 6. If money, banking and financial institution are developed, it will help in having a: (a) Wider market (b) Narrow market (c) Local market (d) State level market 7. Homogenous product exist under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 8. One seller exist under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 9. Selling cost is zero under: (a) Perfect competition (b) Monopoly

Meaning and Types of Markets 7.5

(c) Monopolistic competition (d) All of the above 10. Limited monopoly power of making the price exist under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 11. Large amount of selling cost is incurred under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 12. Commodity is unique with no close substitutes under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 13. Entry is restricted under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 14. Demand curve is perfectly elastic under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 15. Demand curve is elastic under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above

7.6 MCQs in Economics

16. Demand curve is inelastic under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 17. Differentiated but close substitutes exist under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 18. Selling cost is insignificant under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 19. Number of firms is large under: (a) Perfect competition (b) Oligopoly (c) Monopolistic competition (d) Both perfect and monopolistic competition 20. Few firms exist under: (a) Perfect competition (b) Oligopoly (c) Monopolistic competition (d) Both perfect and monopolistic competition. 21. Perfect mobiliy of factors exist under: (a) Perfect competition (b) Oligopoly (c) Monopolistic competition (d) Both perfect competition and oligopoly 22. Entry and exit is free under: (a) Perfect competition (b) Monopoly

Meaning and Types of Markets 7.7

(c) Monopolistic competition (d) Both perfect and monopolistic competition 23. Entry and exit is restricted under: (a) Monopoly (b) Oligopoly (c) Both monopoly and oligopoly (d) Perfect competition 24. Demand curve is undefined under: (a) Monopoly (b) Oligopoly (c) Both monopoly and oligopoly (d) Perfect competition 25. Heavy selling cost is incurred under: (a) Monopolistic competition (b) Both monopolistic competition and oligopoly (c) Monopoly (d) Oligopoly 26. Which market structure has considerable degree of monopoly power? (a) Oligopoly (b) Monopolistic competition (c) Perfect competition (d) Monopoly 27. In which market structure, price and output solution is indeterminate? (a) Oligopoly (b) Monopolistic competition (c) Perfect competition (d) Monopoly 28. When there are two sellers what is the market structure called? (a) Oligopoly (b) Monopoly (c) Trupoly (d) Duopoly 29. In which market structure, the concept of industry is undefined? (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) Duopoly

7.8 MCQs in Economics

30. What word is used instead of industry in monopolistic competition? (a) Product firm (b) Competing firm (c) Cluster (d) Group 31. Who coined the term monopolistic competition? (a) Chamberlin (b) Joan Robinson (c) Robbins (d) Marshall 32. What makes pure competition a perfect market? (a) Perfect knowledge (b) Perfect mobility of factors of production (c) Absence of transportation cost (d) All of the above 33. What brings about pure competition? (a) Large number of buyers and sellers (b) Homogenous product (c) Free entry and exit of firms (d) All of the above 34. Homogenous product means product are: (a) Perfect substitutes (b) Identical (c) Cross elasticity between products is infinity (d) All of the above 35. Homogenous product means products are: (a) Similar (b) Close substitutes (c) Quite alike (d) None of the above 36. Monopoly means: (a) Single firm (c) Barriers to entry

(b) No close substitutes (d) All of the above

37. Discriminating monopoly means: (a) Different prices are changed (b) Consumers might be same or different (c) Commodity is same (d) All of the above

Meaning and Types of Markets 7.9

38. Monopolistic competition means: (a) Large number of sellers (b) Product differentiation (c) Free entry and exit of firms (d) All of the above 39. Oligopoly means: (a) Few sellers (b) Barriers to entry (c) Mutual interdependence (d) All of the above 40. When elasticity of demand is one, MR is ? (a) Zero (b) Positive (c) Negative (d) Maximum 41. When demand is elastic, MR is ? (a) Zero (b) Positive (c) Negative (d) Maximum 42. When demand is inelastic, MR is ? (a) Zero (b) Positive (c) Negative (d) Maximum 43. Relationship between MR, AR and elasticity of demand is: (a) AR = MR Ê 1 - 1 ˆ Ë e¯

Ê ˆ (b) MR = e Á 1 - 1 ˜ p¯ Ë

(c) MR = AR Ê 1 - 1 ˆ Ë e¯

(d) MR = AR (1 – e)

44. What is the basic principle of all market conditions? (a) A firm should produce only if TR ≥ TVC (b) To maximise profit, firm must produce where MR = MC (c) Slope of MC should be more than slope of MR (d) All of the above 45. AR is always equal to (a) Revenue (b) Price

? (c) Cost

(d) Profit

7.10

MCQs in Economics

Solution 1. (a)

2. (b)

3. (a)

4. (a)

5. (a)

6. (a)

7. (a)

8. (b)

9. (a) 10. (c) 11. (c) 12. (b) 13. (b) 14. (a) 15. (c) 16. (b) 17. (c) 18. (b) 19. (d) 20. (b) 21. (a) 22. (d) 23. (c) 24. (b) 25. (b) 26. (b) 27. (a) 28. (d) 29. (c) 30. (d) 31. (a) 32. (d) 33. (d) 34. (d) 35. (d) 36. (d) 37. (d) 38. (d) 39. (d) 40. (a) 41. (b) 42. (c) 43. (c) 44. (d) 45. (b)

chapter 8 Determination of Price

Topics Covered l Equilibrium Price l Effects of Changes in Demand and Supply on Equilibrium Price

8.2 MCQs in Economics

1. When demand is equal to supply, the price is called: (a) Equilibrium price (b) Market Price (c) Both equilibrium price and market price (d) None of the above 2. Who said that demand and supply are like two blades of a pair of scissors ? (a) Adam Smith (b) Marshall (c) Ricardo (d) Samuelson 3. In the long-run, plays a more active roles in determining price. (a) Supply (b) Demand (c) Profit (d) Cost 4. In the (a) Short (c) Long

period, supply is fixed. (b) Very short (d) Very long

5. In the very short period, is more active in determining price. (a) Supply (b) Demand (c) Profit (d) Cost 6. The maximum price consumer is willing to pay to maximise satisfaction is equal to: (a) MU of the commodity (b) MC of the commodity (c) Purchasing power of the consumer (d) None of the above 7. The minimum price acceptable to the producer to maximise profit is equal to: (a) MU of product (b) MC of production (c) Marginal revenue (d) TU of product 8. At a price above the equilibrium price, there is: (a) Excess supply (b) Excess demand (c) Ceiling (d) Flooring 9. At a price below the equilibrium price, there is: (a) Excess supply (b) Excess demand (c) Ceiling (d) Flooring

Determination of Price 8.3

10. Equilibrium price and output changes when: (a) Demand changes (b) Supply changes (c) Both demand and supply changes (d) All of the above 11. When demand increases with no change in supply, equilibrium price and quantity . (a) Rises, rises (b) Rises, falls (c) Falls, falls (d) Falls, rises 12. When demand decreases and there is no shift in supply, the equilibrium price and quantity . (a) Rises, rises (b) Rises, falls (c) Falls, falls (d) Falls, rises 13. When supply increases and there is no change in demand, then equilibrium price and quantity . (a) Falls, rises (b) Rises, falls (c) Rises, rises (d) Falls, falls 14. When supply decreases and there is no change in demand, then and quantity . equilibrium price (a) Falls, rises (b) Rises, falls (c) Rises, rises (d) Falls, falls 15. When both demand and supply increases in the same proportion then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 16. When both demand and supply decreases in the same proportion, then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 17. When both demand and supply increases in the same proportion then equilibrium quantity will . (a) Remain the same (b) Rise (c) Fall (d) None of the above

8.4 MCQs in Economics

18. When both demand and supply decrease in the same proportion, then the equilibrium quantity will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 19. When increase in demand is more than increase in supply, then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 20. When increase in demand is more than increase in supply, then equilibrium quantity will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 21. When increase in demand is less than increase in supply, then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 22. When increase in demand is less than increase in supply, then . equilibrium quantity will (a) Remain the same (b) Rise (c) Fall (d) None of the above 23. When decrease in demand is more than decrease in supply, then . equilibrium price will (a) Remain the same (b) Rise (c) Fall (d) None of the above 24. When decrease in demand is more than decrease in supply, then equilibrium quantity will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 25. When increase in demand is equal to decrease in supply, then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above

Determination of Price 8.5

26. When increase in demand is equal to decrease in supply, then equilibrium quantity will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 27. When decrease in demand is equal to increase in supply, then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 28. When decrease in demand is equal to increase in supply, then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 29. Change in demand means demand can have: (a) Increase (b) Decrease (c) Expansion (d) Increase or decrease 30. Change in supply means supply can have: (a) Increase (b) Expansion (c) Contraction (d) Expansion or contraction

Solution 1. (c)

2. (b)

3. (a)

4. (b)

5. (b)

6. (a)

7. (b)

8. (a)

9. (b) 10. (d) 11. (a) 12. (c) 13. (a) 14. (b) 15. (a) 16. (a) 17. (b) 18. (c) 19. (b) 20. (b) 21. (c) 22. (b) 23. (c) 24. (c) 25. (b) 26. (a) 27. (c) 28. (a) 29. (d) 30. (a).

chapter 9 Price–Output Determination Under Different Market Forms

Topics Covered l Pricing under Perfect Competition l Pricing Under Monopoly l Pricing under Discriminating Monopoly l Pricing under Monopolistic Competition l Pricing under Oligopoly l Comparison Between Perfect Competition and Monopoly l Comparison Between Perfect Competition and Monopolistic Competition

9.2 MCQs in Economicst

1. Total revenue is defined as: (a) Revenue per unit of commodity (b) Addition to revenue when one more unit of the commodity is sold (c) Proceeds from the sale of the commodity (d) All of the above 2. Average revenue is defined as: (a) Revenue per unit of commodity (b) Addition to revenue when one more unit of the commodity is sold (c) Proceeds from the sale of the commodity (d) All of the above 3. Marginal revenue is defined as: (a) Revenue per unit of commodity (b) Addition to revenue when one more unit of the commodity is sold (c) Proceeds from the sale of the commodity (d) All of the above 4. Under perfect competition, shape of TR curve is: (a) Horizontal (b) Inverted-U shaped (c) Straight positively sloping line from origin (d) Inverse-S shaped 5. Under monopoly, shape of TR curve is: (a) Horizontal (b) Inverted-U shaped (c) Straight positively sloping line from origin (d) Inverse-S shaped 6. Under monopolistic competition, shape of TR curve is: (a) Horizontal (b) Inverted-U shaped (c) Straight positively sloping line from origin (d) Inverse-S shaped

Price–Output Determination Under Different Market Forms 9.3

7. Under perfect competition, MR curve: (a) Coincides with demand curve (b) Starts from the same point as the demand curve but falls at twice the rate (c) Vertical (d) Inverted-U shaped 8. Under monopoly, MR curve: (a) Coincide with demand curve (b) Starts from the same point as the demand curve but falls at twice the rate (c) Vertical (d) Inverted-U shaped 9. Under monopolistic competition, MR curve: (a) Coincide with demand curve (b) Starts from the same point as the demand curve but falls at twice the rate (c) Vertical (d) Inverted-U shaped 10. What is the equation to find total profit? (a) TR minus TC (b) Revenue minus Cost (c) MR minus MC (d) AR minus AC 11. Total profit is maximum when: (a) Horizontal gap between TR and TC is maximum (b) Vertical gap between TR and TC is maximum (c) Both vertical and horizontal gap between TR and TC is maximum (d) None of the above 12. What is the basic condition regarding slope of MR and MC curve for equilibrium? (a) Slope of MC > Slope of MR (b) Slope of MC < Slope of MR (c) Slope of MC = Slope of MR (d) All of the above

9.4 MCQs in Economics

13. How do you get the slope condition of MR and MC curve? (a) By finding second derivative of profit and making it less than zero (c) By finding second derivative of profit and making it more than zero (b) By finding second derivative of profit and making it equal to zero (d) None of the above 14. When MR is a horizontal line, its slope is (a) Zero (b) One (c) Infinity

(d) Positive

15. Under perfect competition, MR curve is: (a) Horizontal (b) Vertical (c) Horizontal(d) Rising 16. Accounting profit = Total revenue minus . (a) Total explicit cost (b) Total implicit cost (c) Total cost (d) Average cost 17. When AR is above AC, firm earns: (a) Supernormal profit (b) Loss (c) Breakeven point (d) Minimise losses 18. When AR = AC, firm is at: (a) Supernormal profit point (b) Loss making point (c) Breakeven point (d) Minimise losses point 19. When AC is more than AR, what is the firm doing? (a) Making supernormal profit (b) Incurring loss (c) Having breakeven point (d) Minimising losses 20. When AR passes through some point between minimum AVC and AC, it is called: (a) Supernormal profit (b) Loss (c) Breakeven point (d) Minimising losses 21. When AR passes through minimum point of AVC, it is called: (a) Breakeven point (b) Shutdown point (c) Normal profit point (d) Supernormal profit point

Price–Output Determination Under Different Market Forms 9.5

22. What does perfectly competitive industry earn in the long–run? (a) Normal profit (b) Breakeven point (c) No profit, no loss (d) All of the above 23. Breakeven point means: (a) AR = AC (c) No profit, no loss

(b) TR = TC (d) All of the above

24. From where does the demand curve pass in case of perfectly competitive industry in the long–run? (a) From the minimum point of long-run AC curve (b) From the minimum point of short-run AC curve (c) From the falling portion of short-run AC curve (d) From the minimum point of MC curve 25. Long-run equilibrium condition of perfect competition can be written as: (a) MR = LMC = SMC = LAC = SAC (b) MR = SMC (c) MR = LAC (d) P = LAC Let cost of production for 500 units of a commodity be Rs 10,000. The entrepreneur has invested Rs 30,000 in the business. The normal rate of return in market is 10%. Answer question number 26 to 28. 26. What will happen to the firm when it charges price of Rs 30? (a) It will earn normal profit (b) It will earn supernormal profit (c) It will incur losses (d) It will shut down 27. What will happen to the firm when it changes prices of Rs.35? (a) It will earn normal profit (b) It will earn supernormal profit (c) It will incur losses (d) It will shut down 28. What will happen to the firm when it charges price of Rs 22? (a) It will earn normal profit

9.6 MCQs in Economics

(b) It will earn supernormal profit (c) It will incur losses (d) It will shut down 29. Monopoly is caused by: (a) Control of resources (c) Economics of scale

(b) Legal barriers (d) All of the above

30. The monopoly firm is a: (a) Price fixer (c) Price searcher

(b) Price maker (d) All of the above

31. For (a) (b) (c) (d)

price discrimination, it is essential that: There is no contact among buyers There is imperfect competition in the market The elasticity of demand is different in different markets All of the above

32. In the long–run, monopoly: (a) Can earn supernormal profit (b) Can earn normal profit (c) Cannot incur losses (d) All of the above 33. In the long-run, monopolistic competition: (a) Can earn supernormal profit (b) Can earn normal profit (c) Cannot incur losses (d) All of the above 34. In the long-run, monopolistic competition will have: (a) AR = AC (b) MR = MC (c) Slope of MC > Slope of MR (d) All of the above 35. In the long-run, monopolistic competition will have: (a) No excess capacity (b) Excess capacity (c) Reserve capacity (d) No reserve capacity

Price–Output Determination Under Different Market Forms 9.7

36. Excess capacity is the differences between: (a) Least cost output and profit maximising output (b) Maximum capacity and minimum capacity to produce (c) AR minus AC (d) All of the above 37. Excess capacity does not exist under: (a) Perfect competition (b) Monopolistic competition (c) Theory of wages (d) Theory of rent 38. Oligopoly is caused by: (a) Huge capital investment (b) Absolute cost advantage to the existing firms (c) Mergers (d) All of the above 39. Assumption of Sweezy kinked demand curve model is: (a) Oligopolists do not cooperate (b) Oligopolists match price cuts (c) Oligopolists do not match price rises (d) All of the above 40. In Sweezy kinked-demand curve model, firms prefer to compete on the basis of: (a) Quality (b) Product design (c) Advertisement (d) All of the above 41. The ‘Kink’ in the demand curve occurs at the: (a) Prevailing price (b) Prevailing output (c) Prevailing price and output (d) Price which is determined by the model 42. Above the kink, the demand curve is: (a) Elastic (b) Inelastic (c) Perfectly elastic (d) Perfectly inelastic

9.8 MCQs in Economics

43. Below the kink, the demand curve is: (a) Elastic (b) Inelastic (c) Perfectly elastic (d) Perfectly inelastic 44. Sweezy’s kinked demand curve model shows that prices are: (a) Rigid in an oligopolistic market (b) Fixed in an oligopolistic market (c) Sticky in an oligopolistic market (d) All of the above 45. Sweezy’s model has been criticised because: (a) It does not explain price determination (b) It does not explain demand determination (c) It does not explain MR curve determination (d) All of the above

Solution 1. (c)

2. (a)

3. (b)

4. (c)

5. (b)

6. (b)

7. (a)

8. (b)

9. (b) 10. (a) 11. (b) 12. (a) 13. (a) 14. (a) 15. (a) 16. (a) 17. (a) 18. (c) 19. (b) 20. (d) 21. (b) 22. (d) 23. (d) 24. (a) 25. (a) 26. (a) It is because AR = AC = Rs 30. 27. (b) It is because supernormal profit = AR – AC = 35 – 30 = Rs 5 per unit. 28. (c) It is because loss per unit = AC – AR = 30 – 22 = Rs 8 per unit. 29. (d) 30. (d) 31. (d) 32. (d) 33. (b) 34. (d) 35. (b) 36. (a) 37. (a) 38. (d) 39. (d) 40. (d) 41. (a) 42. (a) 43. (b) 44. (d) 45. (a)

Section Two Indian Economic Development

10. Nature of Indian Economy 11. Role of Different Sectors in India 12. National Income in India 13. Basic Understanding of Tax System in India

chapter 10 Nature of Indian Economy

Topics Covered l India as an Under-developed Economy l India as a Developing Economy l India as a Mixed Economy

10.6

MCQs in Economics

1. Every (a) Second

poor person in the world is an Indian: (b) Third (c) Tenth (d) Fourth

2. India is passing through the phase of population (a) Explosion (b) Control (c) Stability (d) None of the above

:

3. If an economy is undeveloped, it means: (a) Agriculture is the main occupation (b) Standard of living of people is low (c) Production techniques are backward and obsolete (d) All of the above 4. Inequality of income is measured by: (a) Human development index (b) Gini coefficient (c) Per capita income (d) Physical quality of life index 5. What was India’s rank in HDI in 2006? (a) 126 (b) 127 (c) 130

(d) 145

6. When and by whom was HDI introduced? (a) In 1990 by UNDP (b) In 1989 by World bank (c) In 1990 by UNO (d) In 1989 by IMF 7. Indicator of HDI is: (a) Iongevity (c) Standard of living

(b) Educational attainment (d) All of the above

8. Gini coefficient for India is: (a) 0.33 (b) 1

(c) 0.4

(d) 0.9

9. What makes India a developing economy? (a) Rise in national income (b) Rise in per capita income (c) Growing capital income (d) All of the above 10. What makes India an undeveloped economy? (a) Low human development (b) High poverty level (c) Dominant agriculture sector (d) All of the above

Nature of Indian Economy

10.7

11. Social overhead capital include: (a) Education system (b) Health and medical facilities (c) Transport (d) All of the above 12. Unemployment is (a) 34.74 (b) 40

million people in 2004–05: (c) 40.85 (d) 35.72

13. Gross domatic saving is (a) 34.8 (b) 40

percent of GDP in 2006–07: (c) 28 (d) 28.8

14. Gross capital formation (a) 35.9 (b) 39

percent in 2006–07: (c) 40 (d) 34

15. UNDP stands for: (a) United Nation Development Programme (b) United Nation Development Policy (c) United Nation Development Portfolio (d) None of the above

Solution 1. (b)

2. (a)

3. (d)

4. (b)

5. (a)

6. (a)

7. (d)

9. (a) 10. (d) 11. (d) 12. (a) 13. (a) 14. (a) 15. (a)

8. (a)

chapter 11 Role of Different Sectors in India

Topics Covered l Role of Agriculture in India l Role of Industry in India l Pattern of Industrial Development since Independence l Problems of Industrial Development in India l Services

11.2

MCQs in Economics

1. How does agriculture provide the basis for industrial development? (a) By providing jute and cotton (b) By providing herbs (c) By providing oilseeds (d) All of the above 2. Agriculture export item is: (a) Spices (c) Tea

(b) Cotton (d) All of the above

3. Which trade and service depends upon agricultural operation? (a) Cold storage (b) Warehouse (c) Transport (d) All of the above 4. Green resolution stressed upon: (a) Use of HYV seeds (b) Use of fertilizers (c) Use of pesticides (d) All of the above 5. Green revolution was restricted to (a) 2 (b) 3 (c) 5

crops: (d) 4

6. Green revolution is also called: (a) Wheat resolution (b) White resolution (c) Golden resolution (d) All of the above 7. Green revolution was adopted in: (a) 1960 (b) 1966 (c) 1970 8. Non-crop sector is like: (a) Fishery (c) Animal husbandry

(d) 1961

(b) Horticulture (d) All of the above

9. Agriculture is getting diversified. It is clear from: (a) Rise in share of non-crop sectors (b) Rise in area cultivated under commercial crops (c) Rise in area cultivated under superior cereals (d) All of the above 10. Reorganisation of agriculture means: (a) Redistribuion of land (b) Consolidation of holdings (c) Cooperative farming (d) All of the above

Role of Different Sectors in India

11.3

11. Problem of marketing lies in: (a) Inadequate warehousing (b) Multiplicity of middlemen (c) Lack of adequate finance (d) All of the above 12. Problem of industrial development is seen in: (a) Regional imbalances (b) Sectoral imbalances (c) Industrial sickness (d) All of the above 13. Problem of service sector is seen in: (a) Lack of support system (b) Infrastructural problem (c) Poor quality of IT services (d) All of the above 14. India has the in the world. (a) Second

largest scientific and technical manpower (b) Third

(c) Fourth

15. Service sector gives employment poplation. (a) 22.5 (b) 20 (c) 26

(d) Fifth percent of working (d) 27

Solution 1. (d)

2. (d)

3. (d)

4. (d)

5. (c)

6. (a)

7. (b)

9. (d) 10. (d) 11. (d) 12. (d) 13. (d) 14. (a) 15. (a)

8. (d)

chapter 12 National Income in India

Topics Covered l Different Concepts of National Income and Output l Methods of Measuring National Income l Estimation of National Income in India l Problems in the Estimation of National Income in India l Analysis of Indian Economy as seen from National Income Data l GNP and NNP as a Measure of Welfare

12.2

MCQs in Economics

1. National income is also called: (a) NNP at factor cost (b) GNP at factor cost (c) GDP at factor cost (d) GDP at market price 2. GDP at market price: (a) Is a flow concept (b) Is at current prices (c) Excludes transfer payments (d) All of the above 3. GDP excludes: (a) Net factor income from abroad (NFIA) (b) Depreciation (c) Value added by multinational companies in India (d) All of the above 4. NNPfc = Domestic factor income + : (a) Net indirect tax (b) NFIA (c) Mixed income (d) Operating surplus 5. Domestic factor income include: (a) Compensation of employees (b) Operating surplus (c) Mixed income (d) All of the above 6. Personal income is sum total of income actually received by person from all sources in the form of current transfer payments and : (a) Rent (b) Factor incomes (c) Profit (d) Wages 7. In a circular flow of income, we have: (a) Production (b) Distribution (c) Disposition (d) All of the above 8. Income method of measuring national income is also called: (a) Factor payment method (b) Industrial origin method (c) Income disposal method (d) All of the above

National Income in India

12.3

9. Expenditure method of measuring national income is also called: (a) Factor payment method (b) Industrial origin method (c) Income disposal method (d) All of the above 10. Value added method of measuring national income is also called: (a) Factor payment method (b) Industrial origin method (c) Income disposal method (d) All of the above 11. Gross domestic capital formation = Gross domestic fixed capital formation + Changes in stock + : (a) Net acquisition of valuables (b) Government final consumption expenditure (c) Private final consumption expenditure (d) None of the above 12. Problem in estimating national income in India is seen in: (a) Unreliable data (b) Double counting (c) Conceptual difficulty (d) All of the above 13. Net export is: (a) Difference between export and import of a country during one year (b) Difference between export and import of a country during six months (c) Difference between export and import of a country during plan period (d) None of the above 14. Income from property may be: (a) Rent (b) Royalty (c) Interest (d) All of the above

12.4

MCQs in Economics

15. Compensation in kind can be: (a) CCA (b) Dearness allowance (c) Rent (d) None of the above

Solution 1. (a)

2. (d)

3. (a)

4. (b)

5. (d)

6. (b)

7. (d)

9. (c) 10. (b) 11. (a) 12. (d) 13. (a) 14. (d) 15. (d)

8. (a)

chapter 13 Basic Understanding of Tax System in India

Topics Covered l Public Revenue in India l Tax Revenues l Principles of a Good Tax System l Tax Structure in India—Features and Evaluation l MODVAT, VAT and CENVAT l Chelliah Committee on Tax Reform l Non-Tax Revenues

13.2

MCQs in Economics

1. Non-tax revenue can be in the form of: (a) Currency (b) Dividend (c) Interest receipts (d) All of the above 2. Chelliah Committee of tax reform wanted: (a) To improve tax compliance (b) To rationalise excise duties (c) To rationalise custom tariff (d) All of the above 3. Drawback of CENVAT is seen in: (a) It’s inadequate coverage (b) It leaves scope for tax evasion (c) Complicated procedure (d) All of the above 4. Merits of VAT is seen in: (a) Higher revenue growth (b) More transparency (c) Rationalisation of overall tax burden (d) All of the above 5. Objective of MODVAT is: (a) To simplify export procedure (b) To avoid repetitive payment of duties from raw material to the final product stage (c) To avoid payment of interest at different stages of excise duties (d) All of the above 6. Demerit of MODVAT is that: (a) It encourages tax evasion (b) It creates confusion among industrial circles (c) It is not cost reducing (d) All of the above 7. Merit of MODVAT is: (a) It avoids cascading effect of an indirect tax (b) It encourages export (c) It benefits producers (d) All of the above

Basic Understanding of Tax System in India

8. Direct tax is like: (a) Income tax (c) Estate duty

(b) Wealth tax (d) All of the above

9. Merit of direct tax is that: (a) It is progressive (c) It has social objective

(b) It is elastic (d) All of the above

13.3

10. Demerit of direct tax is that: (a) It is inconvenient (b) It has limited coverage (c) It discourages work (d) All of the above 11. Indirect tax is like: (a) Excise duty (c) Sales tax

(b) Custom duty (d) All of the above

12. Merit of indirect tax is that: (a) It promotes social welfare (b) It has wide coverage (c) It is convenient to pay (d) All of the above 13. Demerit of indirect tax is that: (a) It is regressive (b) It is uneconomical (c) It has an element of uncertainty (d) All of the above 14. Indian tax system does not satisfy the canon of: (a) Economy (b) Flexibility (c) Productivity (d) All of the above 15. In India, tax evasion is as high as (a) 5 (b) 10 (c) 15

percent. (d) 20

Solution 1. (d)

2. (d)

3. (d)

4. (d)

5. (d)

6. (d)

7. (d)

9. (d) 10. (d) 11. (d) 12. (d) 13. (d) 14. (d) 15. (d)

8. (d)

14. Population 15. Poverty 16. Unemployment 17. Infrastructural Challenges 18. Inflation 19. Budget and Fiscal Deficit in India 20. Balance of Payments 21. External Debt

chapter 14 Population

Topics Covered l Introduction l Theory of Population l Evaluation of India’s Population Trends According to Population Theory l India’s Population Growth and its Effects on Economic Development l Demographic Profile of India l Population Policies of the Government of India

14.4

MCQs in Economics

1. According (a) There (b) There (c) There (d) There

to stage II of demographic transition theory: is sharp decline in both birth rate and death rate is sharp decline in death rate is sharp decline in birth rate is gradual fall in death rate

2. Stage III of demographic transition occurs in: (a) Primitive agrarian economies (b) Developed economies (c) Developing economies (d) Less developed economies 3. Population growth has led to: (a) Low per capita income (b) Increase in illiteracy (c) Energy crisis (d) All of the above 4. The census is carried out every : (a) year (b) 2 years (c) 10 years (d) 5 years 5. Lowest growth rate of population was recorded in: (a) Nagaland (b) Kerala (c) Chandigarh (d) Punjab 6. Highest growth rate of population was recorded in: (a) Nagaland (b) Kerala (c) Chandigarh (d) Punjab 7. Highest density is (a) 904 (b) 324

person per sq km: (c) 500 (d) 400

8. Highest density is recorded in: (a) West Bengal (b) Kerala (c) Nagaland (d) Punjab 9. Sex ratio is (a) 933

females per 1000 males as per census 2001. (b) 950 (c) 940 (d) 970

10. Highest literacy rate is recorded in: (a) Kerala (b) Bihar (c) Maharashtra (d) Haryana

Population 14.5

11. Lowest literacy rate is recorded in: (a) Kerala (b) Bihar (c) Maharashtra (d) Haryana 12. The proportion of working population to the total population is shown by: (a) Birth rate (b) Death rate (c) Life expectancy (d) Age composition 13. Reasons for decline in death rate are: (a) Control of famines (b) Control of diseases (c) Better medical facilities (d) All of the above 14. Social factor of high birth rate is: (a) Joint family system (b) Lower age at the time of marriage (c) Religious and social superstitions (d) All of the above 15. Economic factor of high birth rate is: (a) Poverty (b) Lower age at the time of marriage (c) Religious and social superstitions (d) All of the above

Solution 1. (b)

2. (b)

3. (d)

4. (c)

5. (b)

6. (a)

7. (a)

9. (a) 10. (a) 11. (b) 12. (d) 13. (d) 14. (d) 15. (a)

8. (a)

chapter 15 Poverty

Topics Covered l Absolute and Relative Poverty l Concept of Poverty and Poverty Line l Extent of Poverty l Causes of Poverty l Measures to Eliminate Poverty

15.2

MCQs in Economics

1. The estimated calorie intake of a rural person is: (a) 2400 calories (b) 2200 calories (c) 2100 calories (d) 2000 calories 2. The estimated calorie intake of a urban person is: (a) 2400 calories (b) 2100 calories (c) 2000 calories (d) 2200 calories 3. In 1999-2000, poverty line was defined for rural area as consumption worth: (a) Rs 454 (b) Rs 545 (c) Rs 328 (d) Rs 238 4. In 1999-2000, the poverty line was defined for urban area as consumption worth: (a) Rs 455 (b) Rs 545 (c) Rs 328 (d) Rs 238 5. Which programme is for the benefit of the elderly? (a) Public Distribution System (b) Social Assistance Programme (c) Pradhan Mantri Gram Sadak Yojana (d) National Food for Work Programme 6. Head Count Ratio is: (a) Number of poor as a proportion of people living below the poverty line (b) Number of people who are living above the poverty line (c) Number of rural people depending on agriculture as their source of livelihood (d) None of above 7. Official data on poverty is made available by: (a) Planning Commission (b) Finance Ministry (c) Central Statistical Organisation (d) Rajya Sabha 8. Causes of rural poverty are: (a) Unequal distribution of land (b) Failure to implement land reforms (c) Low status of women (d) All of above

Poverty 15.3

9. Causes of urban poverty are: (a) High level of migration (b) Presence of educated unemployed youth (c) Inequality in the distribution of urban property (d) All of the above 10. Measures to eliminate poverty can be: (a) Control of population growth rate (b) Rise in growth rate of economic development (c) Increase in the rate of capital formation (d) All of the above 11. Absolute poverty is measured by: (a) Gini coefficient (b) Lorenz curve (c) Poverty line (d) All of the above 12. Relative poverty is measured by: (a) Gini coefficient (b) Poverty line (c) Jail cost of living (d) Calorie intake 13. Income poverty means:: (a) Lack of necessities of material well being (b) Denial of opportunity for living a tolerable life (c) Lack of food (d) Lack of job 14. Human poverty is: (a) Lack of necessities of material well being (b) Denial of opportunity for living a tolerable life (c) Lack of food (d) Lack of job 15. You can identify poor on the basis of: (a) Occupation (b) Ownership of assets (c) Both the above (d) Food habits 16. Chronic poor are: (a) Always poor (b) Usually poor (c) Never poor (d) May be always poor or usually poor

15.4

MCQs in Economics

17. Transient poor are: (a) Occasionally poor (b) Churning poor (c) May be occasionally poor or churning poor (d) Never poor 18. Never poor people live: (a) On the poverty line (c) Below the poverty line

(b) Above the poverty line (d) None of the above

19. Minimum means of subsistence includes: (a) Satisfactory nutritional diet. (b) Minimum clothing, housing and furniture (c) Minimum health facilities, clean water and education (d) All of the above 20. Flaw in anti-poverty programme is seen in: (a) Inadequate financial limits (b) Lack of accountability (c) Poor targeting (d) All of the above

Solution 1. (a)

2. (b)

3. (c)

4. (a)

5. (b)

6. (a)

7. (a)

8. (d)

9. (d) 10. (d) 11. (c) 12. (a) 13. (a) 14. (b) 15. (c) 16. (d) 17. (c) 18. (b) 19. (d) 20. (d)

chapter 16 Unemployment

Topics Covered l Meaning and Types of Unemployment l Measurement of Unemployment l Magnitude of Unemployment l Causes of Unemployment in India l Measures to Solve Unemployment Problem

16.2

MCQs in Economics

1. Those people who work in their own business or profession are called: (a) Self–employed workers (b) Casual workers (c) Regular workers (d) None of the above 2. Those people who are not hired by their employers on a regular basis and do not get social security benefits are called: (a) Self-employed workers (b) Casual workers (c) Regular workers (d) None of the above 3. Those people who are hired by their employers on a permanent basis and get social security benefits are called: (a) Self-employed workers (b) Casual workers (c) Regular workers (d) None of the above 4. Low employment among women is a reflection of: (a) Economic backwardness of a country (b) Use of capital intensive technology (c) Cultural and social norms of a country (d) All of the above 5. Major source of livelihood for people in India is: (a) Self-employment (b) Hired employment (c) Both of the above (d) None of the above 6. In the urban areas, which sector is the main source of livelihood: (a) Primary sector (b) Secondary sector (c) Tertiary sector (d) All of the above 7. In a formal sector, how many workers must be employed: (a) 10 or more (b) Less than 10 (c) Less than 4 (d) 4 or more 8. In an informal sector, how many workers must be employed: (a) 10 or more (b) Less than 10 (c) Less than 4 (d) 4 or more 9. Social security benefits are given to workers in: (a) Formal sector (b) Informal sector (c) Both of the above (d) None of the above

Unemployment

16.3

10. Workers cannot form trade union and are not protected by labour law in which sector: (a) Formal sector (b) Informal sector (c) Both of the above (d) None of the above 11. Rural unemployment can be: (a) Open unemployment (b) Seasonal unemployment (c) Disguised unemployment (d) All of the above 12. Urban unemployment can be: (a) Industrial unemployment (b) Educated unemployment (c) Technological unemployment (d) All of the above 13. People who have not updated their skills in the latest technology are called: (a) Industrially unemployed (b) Technologically unemployed (c) Educationally unemployed (d) All of the above 14. Cause of rural unemployment may be: (a) Backwardness of agriculture (b) Population pressure (c) Lack of financial resources (d) All of the above 15. Cause of urban unemployment may be: (a) Slow growth process (b) Faulty employment planning (c) More use of foreign technology (d) All of the above

Solution 1. (a)

2. (b)

3. (c)

4. (a)

5. (a)

6. (c)

7. (a)

9. (a) 10. (b) 11. (d) 12. (d) 13. (b) 14. (d) 15. (d)

8. (b)

chapter 17 Infrastructural Challenges

Topics Covered l Energy l Transportation l Health l Education

l

Communication

17.2

MCQs in Economics

1. Energy, transport and communication are a type of: (a) Social infrastructure (b) Economic infrastructure (c) Political infrastructure (d) All of the above 2. Health, education and housing are a type of: (a) Social infrastructure (b) Economic infrastructure (c) Political infrastructure (d) All of the above 3. Infrastructure helps in: (a) Raising ability to work (b) Raises size of the market (c) Raises economic development (d) All of the above 4. India invests what percent of its GDP on infrastructure? (a) 5 (b) 7 (c) 10 (d) 12 5. Firewood and dried dung are examples of: (a) Commercial source of energy (b) Non-commercial source of energy (c) Non-conventional source of energy (d) Both (b) and (c) 6. Solar energy, wind energy and tidal energy are examples of: (a) Commercial source of energy (b) Non-commercial source of energy (c) Non-conventional source of energy (d) Both (b) and (c) 7. Agriculture sector has share of 9% in total commercial energy. It shows that: (a) People are smart users of energy (b) Agriculture has low degree of mechanisation (c) There is development of advanced energy efficient technology in agriculture (d) All of the above 8. Which two types of sources of energy are encouraged by policy makers? (a) Hydel and solar (b) Tidal and wind (c) Hydel and wind (d) Solar and wind

Infrastructural Challenges

17.3

9. Operational efficiency of a thermal plant is measured by: (a) PLF (b) CLF (c) LPF (d) FLP 10. Compact fluorescent lamp (CFL) consumes less power than ordinary bulb: (a) 80 (b) 40 (c) 20 (d) 50

percent

11. Indian system of medicine consist of six systems of Indian medicine called: (a) AYNUSH (b) ACCORD (c) AYUSH (d) None of the above 12. States which are lagging behind in health care facilities are: (a) Bihar and Rajasthan (b) Kerala and Gujarat (c) Maharashtra and Arunachal Pradesh (d) All of the above 13. India’s road transport is (a) Fifth (b) Third

largest in the world: (c) Second (d) Tenth

14. Indian’s coastline has how many major ports? (a) 10 (b) 15 (c) 12 (d) 5 15. India has world: (a) 17

largest merchant and shipping fleet in the (b) 10

(c) 1

(d) 4

16. Two PSUs in telecom sector are: (a) BSNL and MTNL (b) MTNL and TRAI (c) TRAI and NIXI (d) BSNL and TRAI 17. India’s postal service started in the year (a) 1837 (b) 1847 (c) 1947

: (d) 1930

18. Greenfield airports are constructed in: (a) Hyderabad (b) Bangalore (c) Goa (d) All of the above 19. An international Greenfield airport is at: (a) Kochi (b) Delhi (c) Bangalore (d) Chennai

17.4

MCQs in Economics

20. PLF is lowest in: (a) North-Eastern region (c) Southern region

(b) Northern region (d) Western region

Solution 1. (b)

2. (a)

3. (d)

4. (a)

5. (b)

6. (c)

7. (b)

8. (c)

9. (a) 10. (a) 11. (c) 12. (a) 13. (c) 14. (c) 15. (a) 16. (a) 17. (a) 18. (d) 19. (a) 20. (a)

chapter 18 Inflation

Topics Covered l Meaning of Inflation l Types of Inflation l Review of Price Trends in India l General Causes of Inflation in India l Consequences of Inflation and Deflation l Measures to Check Inflation

18.2

MCQs in Economics

1. When price rises without any government control over them, it is called: (a) Supressed inflation (b) Open inflation (c) Deflation (d) Galloping inflation 2. When price rises but they remain under control because of government intervention, it is called: (a) Supressed inflation (b) Open inflation (c) Deflation (d) Galloping inflation 3. When price are falling and value of money is rising, it is called: (a) Supressed inflation (b) Open inflation (c) Deflation (d) Galloping inflation 4. When price rises by 8 to 10% per annum and, as a result, savings are less, it is called: (a) Supressed inflation (b) Open inflation (c) Deflation (d) Galloping inflation 5. Cause of demand-pull inflation may be: (a) Growth of black money (b) Rise in population (c) Rise in money supply (d) All of the above 6. In case of demand–pull inflation: (a) Demand curve shifts to the right (b) Demand curve shifts to the left (c) Supply curve shifts to the left (d) Supply curve shifts to the right 7. In case of cost-push inflation: (a) Demand curve shifts to the right (b) Demand curve shifts to the left (c) Supply curve shifts to the left (d) Supply curve shifts to the right 8. Cost-push inflation is due to: (a) Higher wages (b) Higher profit margin (c) Higher tax (d) All of the above 9. In stagflation: (a) Prices are rising and output is falling

Inflation 18.3

(b) Prices are stagnating (c) Output is stagnating (d) Both prices and output are stagnating. 10. Inflation is measured by: (a) Wholesale Price Index (b) Consumer Price Index (c) National Income Deflation (d) All of the above 11. Inflation results in: (a) Higher capital formation (b) Benefit for producers (c) Benefit for farmers (d) All of the above 12. Dangers of inflation may be: (a) Rise in inequality of income and wealth (b) High cost economy (c) Loss of tax revenue (d) All of the above 13. Monetary measures to control inflation can be: (a) Raise bank rate (b) Raise cash reserve rate (c) Raise marginal requirement (d) All of the above 14. Cash Reserve Ratio is defined as that portion of total deposits which a commercial bank is required to keep with : (a) Itself (b) RBI (c) Other banks (d) Public 15. Satutory Liquidity Ratio is defined is that portion of total deposits which a commercial bank has to keep with : (a) Itself (b) RBI (c) Other banks (d) Public 16. Bank rate is that rate of interest at which (a) RBI, commercial banks

lends to

:

18.4

MCQs in Economics

(b) Commercial banks, public (c) RBI, government (d) Commercial banks, government 17. When bank rate is raised then: (a) People prefer to deposit in banks (b) People prefer to borrow from banks (c) Government prefer to borrow from banks (d) Commercial banks prefer to deposit in RBI 18. Open Market Operation is defined as: (a) Buying and selling of eligible securities in the bill market by the RBI (b) Buying and selling of eligible securities in the bill market by the commercial banks (c) Buying and selling of shares by the RBI (d) Buying and selling of shares by the banks 19. Fiscal measures to control inflation can be: (a) Raising the rates of all taxes (b) Reducing government expenditure (c) Reducing non-developmental expenditure (d) All of the above 20. Public expenditure is incurred to: (a) Preserve the society (b) Improve the quality of life of people (c) Improve standard of living of people (d) All of the above

Solution 1. (b)

2. (a)

3. (c)

4. (d)

5. (d)

6. (a)

7. (c)

8. (d)

9. (a) 10. (d) 11. (d) 12. (d) 13. (d) 14. (b) 15. (a) 16. (a) 17. (a) 18. (a) 19. (d) 20. (d)

chapter 19 Budget and Fiscal Deficit in India

Topics Covered l Meaning of Budget l Types and Calculation of Various Deficits in the Union Budget l Conclusions

19.2

MCQs in Economics

1. Budget is placed before: (a) Lok Sabha (b) Rajya Sabha (c) Both Lok Sabha and Rajya Sabha (d) Parliament 2. Budget is a: (a) Financial statement (c) Political statement

(b) Monetary statement (d) All of the above

3. Which article of the constitution takes about the budget? (a) Article 110 (b) Article 111 (c) Article 112 (d) Article 113 4. One year period from 1 April to 31 March of next year is called: (a) Monetary year (b) Fiscal year (c) Plan year (d) Tax year 5. Surplus budget takes place: (a) When receipts are more than expenditure (b) When tax revenue is more than expenditure (c) When capital receipt is more than capital expenditure (d) When expenditure is more than receipts 6. Tax (a) (b) (c) (d)

revenue may come from: Tax on income and expenditure Tax on property and capital transactions Tax on goods and services All of the above

7. Revenue expenditure may be on: (a) Subsidies (b) Non-interest expenditure (c) Interest expenditure (d) All of the above 8. Capital receipts may come from: (a) Market borrowings (b) Provident funds (c) Recoveries of loans (d) All of the above 9. Capital expenditure may be on: (a) Loans and advances (b) External loans raised by the central government

Budget and Fiscal Deficit in India

19.3

(c) Subsidies (d) All of the above 10. Total expenditure minus budgetary deficit = (a) Total receipts (b) Revenue receipts (c) Capital receipts (d) All of the above

:

11. Fiscal deficit minus borrowings and other liabilities = (a) Revenue deficit (b) Budgetary deficit (c) Capital deficit (d) None of the above 12. Direct tax can be: (a) Gift tax (c) Corporation tax

(b) Wealth tax (d) All of the above

13. Indirect tax can be: (a) Excise duty (c) Tax on services

(b) Entertainment tax (d) All of the above

:

14. Revenue expenditure may be: (a) Salaries (b) Pensions (c) Grants (d) All of the above 15. Developmental expenditure can be on: (a) Education (b) Social welfare (c) Scientific research (d) All of the above

Solution 1. (c)

2. (a)

3. (c)

4. (b)

5. (a)

6. (d)

7. (d)

9. (a) 10. (a) 11. (b) 12 (d) 13. (d) 14. (d) 15. (d)

8. (d)

chapter 20 Balance of Payments

Topics Covered l Meaning of Balance of Trade and Balance of Payments l Components of Balance of Payment l Difference between BOP and BOT l Trends in India’s Balance of Payments l Measures to Improve India’s Balance of Payment Position

20.2

MCQs in Economics

1. Difference in the value of import and export of good is called: (a) Balance of payments (b) Balance of trade (c) Foreign trade (d) Export-import difference 2. A systematic record of a country’s external transactions over a period of one year is called: (a) Balance of payments (b) Balance of trade (c) Foreign trade (d) Export-import difference 3. Current account of BOP records transactions relating to: (a) Exchange of goods (b) Exchange of services (c) Unilateral transfers (d) All of the above 4. Current transactions are of (a) Flow (b) Stock (c) Both flow and stock (d) None of the above

nature:

5. Capital transactions are of (a) Flow (b) Stock (c) Both flow and stock (d) None of the above

nature:

6. Invisibles may be: (a) Services (c) Transfer payments

(b) Investment income (d) All of the above

7. Capital account may be: (a) Private capital (c) Official capital

(b) Banking capital (d) All of the above

8. Amortization of capital means: (a) Purchase and resale of securities sold to the foreigners (b) Purchase and resale of securities sold to the people of the country (c) Only resale of securities sold to the people of the country (d) Only purchase of securities sold to the people of the country

Balance of Payments

20.3

9. Transfer payments may be: (a) Donations (b) Grants in cash by foreign governments (c) Contributions from UN, WHO, etc. (d) All of the above 10. Miscellaneous invisibles may be: (a) Royalties (b) Management fees (c) Subscription to journals (d) All of the above 11. Miscellaneous errors and omissions means: (a) Incomplete data (b) Inaccurate data (c) Both incomplete and inaccurate data (d) None of the above 12. Devaluation makes: (a) Export profitable (b) Import profitable (c) Both export and import profitable (d) None of the above 13. India’s BOP position can be improved by: (a) Import reduction and substitution (b) Export promotion (c) Trapping invisible (d) All of the above 14. Imports of (a) Cosmetics (c) Food items

should be reduced. (b) Sanitary goods (d) All of the above

15. Exports can be promoted by: (a) Exploring and identifying new markets (b) Relaxation of controls on export of commodities (c) Special facilities should be given in traditional and nontraditional items (d) All of the above

20.4

MCQs in Economics

Solution 1. (b)

2. (a)

3. (d)

4. (a)

5. (b)

6. (d)

7. (d)

9. (d) 10. (d) 11. (c) 12. (a) 13. (d) 14. (d) 15. (d)

8. (a)

chapter 21 External Debt

Topics Covered l Meaning of Public Debt l Importance and Reasons for Public Debt l Dangers of Public Debt l Growth of Public Debt in India— Dimensions, Causes and Effects

21.2

MCQs in Economics

1. External debt may include: (a) NRI deposits (b) Commercial borrowing from abroad (c) Borrowings from IMF, world bank etc (d) All of the above 2. Public debt means: (a) Loans raised by (b) Loans raised by (c) Loans raised by (d) Loans raised by

government commercial banks RBI. private sector

3. Reasons for public debt may be: (a) To fight depression (b) To control inflation (c) To finance war (d) All of the above 4. Dangers of public debt may be: (a) It is a threat to political freedom (b) It is a burden on common man (c) It results in drain of wealth (d) All of the above 5. Rise in public debt is due to: (a) Rise in development expenditure (b) Rise in defence expenditure (c) Rise in debt servicing (d) All of the above 6. Debt trap means: (a) More aid is needed to meet the debt servicing requirements (b) More debt is needed to finance developmental expenditure (c) More debt is needed to finance war expenses (d) All of the above 7. India has the highest share of concessional debt among the top 15 most debted countries. (a) Second (b) Third (c) Fourth (d) Fifth 8. Importance of public debt is that: (a) It helps in financing public enterprises

External Debt

21.3

(b) It helps in expansion of education (c) It helps in creation of infrastructrual facilities (d) All of the above 9. India is largest debtor in the world in 2006. (Economic survey 2007–08) (a) Fifth (b) Third (c) Fourth (d) Eighth 10. Total external debts is (a) 17.9 (b) 20

percent of GNI in 2006. (c) 18 (d) 19

11. India had the lowest debt service ratio among top 10 debtor countries in 2006 (Economic survey 2007–08). (a) Second (b) Third (c) Fifth (d) Fourth 12. Rise in total external debt is due to: (a) Rise in external commercial borrowings (b) NRI deposits (c) Short-term debt (d) All of the above 13. India’s rate of commercial debt to total debt (in percent) in 2006 was: (a) 23.3 (b) 25 (c) 25.8 (d) 28 14. India’s debt service ratio (in percent) in 2006 was: (a) 4.8 (b) 5.8 (c) 6.8 (d) 7.8 15. India has (a) Fourth

lowest ratio of short–term debt to total debt. (b) Second (c) Third (d) Fifth

Solution 1. (d)

2. (a)

3. (d)

4. (d)

5. (d)

6. (a)

7. (a)

9. (a) 10. (a) 11. (a) 12. (d) 13. (a) 14. (a) 15. (a)

8. (d)

22. Economic Reforms and Liberalisation 23. Liberalisation, Privatisation and Disinvestment 24. Globalisation

chapter 22 Economic Reforms and Liberalisation

Topics Covered l Background of Economic Reforms in 1991 l Industrial Sector Reforms l Financial Sector Reforms l External Sector Reforms l Impact of Economic Reforms

22.4

MCQs in Economics

1. Economic reforms started in the year: (a) 1990 (b) 1991 (c) 1980

(d) 2007

2. Before economic reforms, inflation was at: (a) 16.8% (b) 6% (c) 6.8% (d) 3.4% 3. Economic reforms are reforms in the: (a) Industrial sector (b) Financial sector (c) Fiscal sector (d) All sectors of an economy 4. New economic policy is also called: (a) Economic reforms (b) New industrial policy (c) Amendment in MRTP Act (d) Reforms in small scale sector 5. New economic policy is a policy of: (a) Liberalisation (b) Globalisation (c) Privatisation (d) All of the above 6. Abolition of industrial licensing is a part of: (a) Liberalisation policy (b) Globalisation policy (c) Privatisation policy (d) All of the above 7. Industrial licensing has been abolished except for a list of how many industries? (a) 6 (b) 8 (c) 12 (d) 10 8. Number of industries reduced for public sector is: (a) 3 (b) 6 (c) 8 (d) 10 9. MRTP stands for: (a) Monopolies and Restrictive Trade Practices (b) Monopolistic and Restrictive Trade Practices (c) Monopoly and Reserved Trade Practices (d) Monopolies and Restrictive Trade Policy 10. Financial sector includes: (a) Banking and non–banking financial institutions (b) Stock exchange market (c) Foreign exchange market (d) All of the above

Economic Reforms and Liberalisation

22.5

11. SEBI stands for: (a) Statutory Exchange Board of India (b) Securities and Exchange Board of India (c) Securities and Exchange Bureau of Investigation (d) State Exchange Bank of India 12. FERA stands for: (a) Foreign Exchange Regulation Act (b) Foreign Exchange Regulatory Authority (c) Firm’s Exchange and Regulation Authority (d) Forward Exchange and Regulation Act 13. Policy started to promoted agricultural exports is: (a) Vishesh Krishi Upaj Yojana (b) Export promotion cell for Agricultural Products (c) Vishesh Vikas Yojana (d) Krishi Anaj Yojana 14. FEMA stands for: (a) Foreign Earnings Management Act (b) Foreign Exchange Management Act (c) Foreign Exchange and Management Activities (d) Forward Earning and Management Act 15. EPCG stands for: (a) Export Promotion Capital Goods (b) Export Promotion Council of the Government (c) Earnings Promotion Capital Goods (d) Export Promotion of Country’s Goods 16. Devaluation means: (a) Lowering in the official value of a currency with respect to gold or foreign currency (b) Raising in the official value of a currency with respect to gold or foreign currency (c) Both of the above (d) None of the above

22.6

MCQs in Economics

17. Economic reforms are also called: (a) First generation reforms (b) Second generation reforms (c) Third generation reforms (d) All of the above 18. Economic reforms led to rural distress because: (a) Public investment in infrastrure of the agricultural sector has been reduced (b) International competition for Indian farmers has increased (c) Removal of subsidies has raised cost of production (d) All of the above 19. The result of economic reforms is seen in: (a) Rise in GDP growth (b) Rise in foreign exchange reserves (c) Control of inflation (d) All of the above 20. Failure of economic reforms is seen in: (a) Agricultural crisis (b) Protecting the environment (c) Slowdown in industrial growth (d) All of the above

Solution 1. (b)

2. (a)

3. (d)

4. (a)

5. (d)

6. (a)

7. (a)

8. (a)

9. (a) 10. (d) 11. (b) 12. (a) 13. (a) 14. (b) 15. (a) 16. (a) 17. (a) 18. (d) 19. (d) 20. (d)

chapter 23 Liberalisation, Privatisation and Disinvestment

Topics Covered l Liberalisation

l

Privatisation

l

Disinvestment

23.2

MCQs in Economics

1. Objectives of privatisation policy are: (a) To improve the government’s financial position (b) To improve the performance of an enterprise (c) To reduce the burden on public administration (d) All of the above 2. Some ‘navratnas’ PSU’s are: (a) BPCL, ONGC (c) BHEL, NTPC

(b) SAIL, MTNL (d) All of the above

3. Government has granted more financial and managerial autonomy to how many ‘mini ratnas’ ? (a) 97 (b) 100 (c) 200 (d) 90 4. Privatisation has led to: (a) Reduction in budgetary deficit (b) Accountability in PSUs (c) Efficiency in PSUs (d) All of the above 5. The criticism of privatisation is that: (a) It has led to growth of monopoly power in the hands of big business houses (b) It has no social welfare objectives (c) It does not take up risky projects (d) All of the above 6. Main methods of disinvestment are: (a) Minority sale (b) Strategic sale (c) Both of the above (d) None of the above 7. When the government’s own financial institutions buy the government’s stake in select PSU’s and hold them until a third buyer comes up, it is called: (a) Strategic sale (b) Warehousing (c) Golden share (d) Cross-holding 8. What were issued to tap overseas markets ? (a) Public issue (b) Private issue

Liberalisation, Privatisation and Disinvestment

23.3

(c) GDRs (Global Depository Receipts) (d) GDRs (Government’s Deposit Revenue) 9. When government retains stake upto 26% in the PSU to protect its interest, it is called: (a) Warehousing (b) Cross-holding (c) Golden share (d) Strategic sale 10. When the government sells a major portion of its stake to a strategic buyer and also gives out the management control, it is called: (a) Strategic sale (b) Cross-holding (c) Warehousing (d) Golden share

Solution 1. (d)

2. (d)

9. (c) 10. (a)

3. (a)

4. (d)

5. (d)

6. (c)

7. (b)

8. (c)

chapter 24 Globalisation

Topics Covered l Meaning and Parameters of Globalisation l Case for Globalisation l Case Against Globalisation l Measures Toward Globalisation l Effects of Globalisation on Indian Economy l Main Organisations for Facilitating Globalisation

24.2

MCQs in Economics

1. Some of the problems of globalisation are: (a) Devastation of local producers (b) Mounting strikes (c) Small businesses are adversely affected (d) All of the above 2. Outsourcing means: (a) Obtaining goods and services by contract from an outside source (b) Obtaining goods by contract from an outside source (c) Obtaining services by contract from an outside source (d) None of the above 3. Company/companies offering BPO or call centers services are: (a) Genpact (b) HCL (c) WIPRO (d) All of the above 4. Some services outsourced from India are: (a) Banking services (b) Voice-based business processes (c) Music recording (d) All of the above 5. Advantage of outsourcing is: (a) It is cheaper to contract services from developing countries (b) There is easy availability of skilled manpower at lower wage rate (c) Both of the above (d) None of the above 6. What percent share of global BPO industry does India have? (a) 46% (b) 50% (c) 60% (d) 40% 7. Main multilateral economic organisations for facilitating globalisation are: (a) IMF (b) World bank (c) WTO (d) All of the above 8. Globalisation means: (a) Removal of controls and restrictions

Globalisation

24.3

(b) Growing economic interdependence among countries in the world (c) Selling the PSUs to global investors (d) All of the above 9. Globalisation has brought about: (a) New efficient production methods (b) New world order (c) Human development (d) All of the above 10. India is a favourite outsourcing destination because: (a) It can easily provide skilled people (b) The price charged by Indians is relatively less (c) India has the advantage of time difference as it is located on the other side of the developed countries (d) All of the above 11. IMF started its operations from: (a) March 1947 (b) March 1946 (c) Feb. 1947 (d) Feb. 1945 12. One of the main objective of IMF is to: (a) Bring stability in the international financial system (b) Bring equilibrium in the balance of payments (c) Implement multilateral trade agreements (d) All of the above 13. World Bank is also called: (a) IBRD (c) Bank of America

(b) Asian Development Bank (d) None of the above

14. Headquarters of World Bank is in: (a) London (b) Canada (c) Washington, D.C. (d) Australia 15. GATT stands for: (a) General Act on Trade and Tariff (b) General Agreement on Trade and Tariff (c) General Agreement on Tariff and Trade

24.4

MCQs in Economics

(d) Government’s Agreement on Tariff and Trade 16. Bilateral Trade is a trade agreement involving: (a) Two countries (b) All countries (c) Five countries (d) None of the above 17. Tariff barriers are impored on: (a) Import to make them relatively costly (b) Export to make them relatively cheaper (c) Both import and export (d) None of the above 18. Most debated forum is: (a) Free flow (b) Free flow (c) Free flow (d) Free flow

parameter of globalisation at WTO or any other of of of of

labour capital goods and services technology

19. Current membership of IMF is: (a) 184 countries (b) 180 countries (c) 149 countries (d) None of the above 20. Current membership of WTO is: (a) 149 countries (b) 184 countries (c) 185 countries (d) None of the above

Solution 1. (d)

2. (a)

3. (d)

4. (d)

5. (c)

6. (a)

7. (d)

8. (b)

9. (d) 10. (d) 11. (a) 12. (a) 13. (a) 14. (c) 15. (c) 16. (a) 17. (a) 18. (a) 19. (a) 20. (a)

25. Money 26. Commercial Banks 27. The Reserve Bank of India (RBI)

chapter 25 Money

Topics Covered l Importance of Money l Definition of Money l Functions of Money l Indian Monetary System l Definition of Money Supply l Money Stock in India

25.4

MCQs in Economics

1. Barter system suffered from: (a) Lack of common measure of value (b) Lack of double coincidence of wants (c) Difficulty in storage of extra goods (d) All of the above 2. Functional definition of money means money is a: (a) Medium of exchange (b) Measure of value (c) Standard of deferred payments (d) All of the above 3. Narrow definition of money is based upon the function of money as: (a) Medium of exchange (b) Measure of value (c) Standard of deferred payments (d) All of the above 4. When money works as a common denominator into which the values of all goods and services are expressed, it is which function of money? (a) Medium of exchange (b) Measure of value (c) Standard of deferred payments (d) All of the above 5. Which function of money removes the difficulty of double coincidence of wants? (a) Medium of exchange (b) Measure of value (c) Standard of deferred payments (d) All of the above 6. India is on (a) Paper

currency standard: (b) Metal (c) Foreign

(d) Dollar

7. RBI has the sole right to issue currency notes other than: (a) Rs 5 note (b) Rs 10 note (c) Re 1 note (d) None of the above

Money

8. India is following (a) Balanced (c) Minimum

25.5

reserve system in note issuing: (b) Maximum (d) Neutral

9. Paper currency is : (a) Convertible (b) Partially convertible (c) Inconvertible (d) Both convertible and inconvertible 10. Money supply is defined as: (a) Stock of money held by public at a point of time in economy (b) Flow of money held by public at a point of time in economy (c) Flow of money held by government at a point of time in economy (d) Stock of money held by government at a point of time in economy

an an an an

11. Money supply consists of: (a) Currency (b) Deposit (c) Both currency and deposit (d) None of the above 12. What is excluded from money supply? (a) Gold held with Central Bank (b) Coins and currency held by commercial banks as their cash reserves (c) Cash held by the government in treasury (d) All of the above 13. C + DD + OD = (a) M1 (b) M2

? (c) M3

(d) M4

14. Which measure of money supply lays stress on medium of exchange function of money? (b) M2 (c) M3 (d) M4 (a) M1

25.6

MCQs in Economics

15. Which measure of money supply lays stress on the store of value function of money? (a) M1 (b) M2 (c) M3 (d) M4

Solution 1. (d)

2. (d)

3. (a)

4. (b)

5. (a)

6. (a)

7. (c)

9. (c) 10. (a) 11. (c) 12. (d) 13. (a) 14. (a) 15. (c).

8. (c)

chapter 26 Commercial Banks

Topics Covered l Banking—An Introduction l Functions of a Bank l Essentials of a Sound Banking System l Commencial Banks—Meaning and Functions l Nationalisation of Banks l Commercial Banks after Nationalisation l Importance and Shortcomings of Commercial Banking in India

26.2

MCQs in Economics

1. Who can create credit? (a) Commercial banks (c) Private banks

(b) RBI (d) Foreign banks

2. Which act defines a banking company as one which transacts the business of banking in any state of India and the world? (a) The Banking Companies Act, 1949 (b) The Banking Companies Act, 1948 (c) The Banking Companies Act, 1947 (d) The Banking Act, 1948 3. Deposit received by bank can be: (a) Demand deposit (b) Fixed deposit (c) Saving deposit (d) All of the above 4. Lending by bank can be: (a) In the form of cash credit (b) In the form of overdrafts (c) In the form of discounting bills of exchange (d) All of the above 5. Agency services can be: (a) Purchase and sale of shares and securities (b) Making regular payments such as insurance premium (c) Collection of cheques and bills (d) All of the above 6. A sound banking system should have: (a) Marketability (b) Dispersal (c) Diversification of risk (d) All of the above 7. Function of commercial bank can be: (a) Credit creation (b) Transfer of funds (c) Receiving deposits (d) All of the above 8. Fixed deposit is also called: (a) Demand deposit (b) Time deposit (c) Cumulative deposit (d) Accumulated deposit 9. Current account deposit is also called: (a) Demand deposit (b) Time deposit

Commercial Banks

(c) Cumulative deposit

26.3

(d) Accumulated deposit

10. Saving bank deposit is also called: (a) Demand deposit (b) Time deposit (c) Cumulative deposit (d) Accumulated deposit 11. A bank can provide: (a) Trade information and statistics (b) Project reports (c) Safe keeping of valuables (d) All of the above 12. Shortcoming of banks at the time of independence was that they: (a) Did not work for nation’s interest (b) Catered to the needs of few big industrial houses (c) Ignored small scale industries and agriculture (d) All of the above 13. Aim of nationalising banks is to: (a) Encourage new class of entrepreneurs. (b) Give professional touch to management. (c) Remove control by few. (d) All of the above. 14. Shortcoming of commercial banks is seen in: (a) Excessive overdues. (b) Poor customer service. (c) Regional disparity. (d) All of the above. 15. Achievement of nationalisation of banks is seen in: (a) Rise in branches operating in unbanked and rural areas. (b) Rise in bank lending. (c) Diversification of funds. (d) All of the above.

Solution 1. (a)

2. (a)

3. (d)

4. (d)

5. (d)

6. (d)

7. (d)

9. (a) 10. (c) 11. (d) 12. (d) 13. (d) 14. (d) 15. (d)

8. (b)

chapter 27 The Reserve Bank of India (RBI)

Topics Covered l Central Bank—An Introduction l Definition of Central Bank l Functions of Reserve Bank of India l Reserve Bank of India—Its Role l Comparison between Central Bank and Commercial Bank l Meaning and Objectives of Monetary Policy

27.2

MCQs in Economics

1. Central bank promotes commercial banking by: (a) Providing cheap rediscounting facilities to commercial banks (b) Providing liberalised rediscounting facilities to commercial banks (c) Giving subsidies to new banks (d) All of the above 2. Central bank develops long–term financial institutions like: (a) IDBI (b) IFCI (c) ICICI (d) All of the above 3. Which Act has given control and supervision powers to RBI over commercial banks and co-operative banks? (a) RBI Act, 1934 (b) Banking Regulation Act, 1959 (c) Both RBI Act 1934 and Banking Regulation Act 1959 (d) Banking Regulation Act, 1960 4. What can RBI do to improve efficiency of the banking system? (a) It can being about compulsory amalgamation of weak banks (b) It can claim for compulsory liquidation (c) It can expedite winding up of proceedings to safeguard the interest of depositors (d) All of the above 5. The merit of issuing notes with RBI can be seen in: (a) Uniformity in note issue (b) Stability in currency (c) Control of credit (d) All of the above 6. When RBI acts a banker to the government, what does it do? (a) RBI keeps bank accounts of the government (b) RBI carries out government transactions (c) RBI advises the government on all financial and monetary matters (d) All of the above 7. When RBI is lender of last resort, what does it mean? (a) RBI advances necessary credit against eligible securities (b) Commercial banks give fund to the RBI

The Reserve Bank of India (RBI) 27.3 (c) RBI advances money to public whenever there is any emergency (d) All of the above 8. Central bank (a) Create (c) Restricts 9. 10.

credit. (b) Controls (d) None of the above

credit policy promotes investment. (a) Dear (b) Cheap (c) Restricted (d) Green policy refers to policy measures taken by RBI to control and regulate money supply. (a) Credit (b) Financial (c) Monetary (d) Fiscal

11. Quantitative instrument of RBI can be: (a) Bank Rate policy (b) Cash Reserve Ratio (c) Statutory Liquidity Ratio (d) All of the above 12. Objective of monetary policy is to: (a) Control inflation (b) Discourage hoarding of commodities (c) Encourage flow of credit into neglected sector (d) All of the above 13. CRR is (a) 7.5

percent in 2007. (b) 7 (c) 5

(d) 5.5

14. IDBI stands for: (a) Industrial Development Bank of India (b) Indian Development Bank for Industries (c) Industrial Development Bureau of India (d) None of the above 15. IFCI stands for: (a) Industrial Finance Corporation of India (b) Investment Finance Corporation of India (C) Infrastructure Finance Corporation of India (D) None of the above

27.4

MCQs in Economics

Solution 1. (d)

2. (d)

3. (c)

4. (d)

5. (d)

6. (d)

7. (a)

9. (b) 10. (c) 11. (d) 12. (d) 13. (a) 14. (a) 15. (a)

8. (b)

Model Test Paper I 1. Who wrote ‘Nature and Significance of Economic Science’? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 2. Economics is: (a) A science (b) An art (c) Both a science and an art (d) Neither a science nor an art 3. A rise in price of goods leads to fall in its quantity demanded. Thus, government showed cheek rise in prices. This statement refers to: (a) Positive economics (b) Normative economics (c) Both positive and normative economics (d) None of the above 4. Disadvantages of inductive method can be: (a) Expensive method (c) Chances of personal bias of the investigators are present (b) Complex method (d) All of the above 5. PP¢ (a) (b) (c) (d)

shifts rightwards Improvement in Improvement in Improvement in Stagnation

to P1P1¢. It technology technology technology

shows: in good X in good Y in both good X and good Y

P.2 MCQs in Economics

6. Demand function is given as Dx = f (Px , P2, Y, T ). What does T stand for: (a) Taxes (b) Tastes (c) Both taxes and tastes (d) None of the above 7. Coefficient of elasticity of demand is negative. It means: (a) Consumers sometimes buy negative units of a commodity (b) Price and quantity demanded move in same direction (c) Law of demand holds (d) The two goods are complementary to each other 8. Income elasticity is given as: (a) ey =

DQ y ◊ Dy Q

(b) ey =

Dy Q ◊ DQ y

(c) ey =

DQ Q ◊ Dy y

(d) ey =

Dy Q ◊ DQ y

9. Saturation point means: (a) TU is rising, and MU is falling (b) TU is falling and MU is negative (c) TU is maximum and MU is zero (d) Falling MU curve 10. MRS is given by. (a) DX DY

(b) DX – DY (c) DY DX

(d) DY – DX.

11. Budget set is: (a) Right angled triangle formed by the budget line with the axes (b) All points on the budget line (c) Points inside the budget line (d) Points on y-axis from where budget line starts and the point on x-axis where budget line ends 12. When tax is raised, consumer surplus: (a) Falls (b) Rises (c) Remain unchanged (d) Becomes zero

Model Test Paper I

P.3

13. What is constant in the law of supply? (a) Price of related goods (b) State of technology (c) Cost of production (d) All of the above 14. When same quantity is supplied at a higher price, it shows: (a) Contraction in supply (b) Decrease in supply (c) Expansion in supply (d) Increase in supply 15. Arc elasticity of supply is given by the formula: (a)

q1 - q 2 p + p2 ¥ 1 q1 + q 2 p1 - p 2

q 1 + q 2 p1 + p 2 (b) q - q ¥ p - p 1 2 1 2

(c)

q 2 - q 1 p 2 - p1 ¥ q 2 + q 1 p 2 - p1

(d)

p1 - p 2 q 1 + q 2 ¥ p1 + p2 q1 - q 2

16. Voluntary services is an example of: (a) Form utility (b) Time utility (c) Place utility (d) All of the above 17. When land differs in fertility, it is called: (a) Heterogeneity of land (b) Homogeneity of land (c) Extensive cultivation of land (d) All of the above 18. When supply curve of labour is backward bending, it means: (a) Substitution effect = Income effect (b) Substitution effect > Income effect (c) Substitution effect < Income effect (d) None of the above 19. When TP is falling, then MP is: (a) Falling (b) Negative (c) Zero 20. TC curve is shaped starting from (a) Inverse–S, origin (b) Inverse–S, total fixed cost level (c) Straight line, average fixed cost level (d) Straight line, total fixed cost level

(d) Maximum .

P.4 MCQs in Economics

21. What is reserve capacity? (a) It is the built-in-capacity to produce at minimum cost a range of output (b) It is the difference between equilibrium output and least cost output (c) It is the capacity of a plant to produce (d) All of the above 22. When long-run AC is rising, it is due to: (a) Law of variable proportion (b) Decreasing returns (c) Diminishing returns (d) Negative returns 23. If the commodities have universal demand, it will have a: (a) Wider market (b) Narrow market (c) Local market (d) State level market 24. Demand curve is perfectly elastic under: (a) Perfect competition (b) Monopoly (c) Monopolistic competition (d) All of the above 25. Demand curve is undefined under: (a) Monopoly (b) Oligopoly (c) Both monopoly and oligopoly (d) Perfect competition 26. When demand decreases and there is no shift in supply, the equilibrium price and quantity . (a) Rises, rises (b) Rises, falls (c) Falls, falls (d) Falls, rises 27. When increase in demand is less than increase in supply, then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above

Model Test Paper I

P.5

28. When decrease in demand is equal to increase in supply, then equilibrium price will . (a) Remain the same (b) Rise (c) Fall (d) None of the above 29. Under perfect competition, shape of TR curve is: (a) Horizontal (b) Inverted-U shaped (c) Straight positively sloping line from origin (d) Inverse-S shaped 30. When AR passes through minimum point of AVC, it is called: (a) Breakeven point (b) Shutdown point (c) Normal profit point (d) Supernormal profit point 31. In the long-run, monopolistic competition will have: (a) AR = AC (b) MR = MC (c) Slope of MC > Slope of MR (d) All of the above 32. Inequality of income is measured by: (a) Human development index (b) Gini coefficient (c) Per capita income (d) Physical quality of life index 33. Green revolution was restricted to (a) 2 (b) 3 (c) 5

crops: (d) 4

34. In a circular flow of income, we have: (a) Production (b) Distribution (c) Disposition (d) All of the above 35. Demerit of direct tax is that: (a) It is inconvenient (b) It has limited coverage (c) It discourages work (d) All of the above 36. Population growth has led to: (a) Low per capita income (b) Increase in illiteracy (c) Energy crisis (d) All of the above

P.6 MCQs in Economics

37. Head Count Ratio is: (a) Number of poor as a proportion of people living below the poverty line (b) Number of people who are living above the poverty line (c) Number of rural people depending on agriculture as their source of livelihood (d) None of above 38. In an informal sector, how many workers must be employed: (a) 10 or more (b) Less than 10 (c) Less than 4 (d) 4 or more 39. Firewood and dried dung are examples of: (a) Commercial source of energy (b) Non-commercial source of energy (c) Non-conventional source of energy (d) Both (b) and (c) 40. When price rises by 8 to 10% per annum and, as a result, savings are less, it is called: (a) Supressed inflation (b) Open inflation (c) Deflation (d) Galloping inflation 41. Capital expenditure may be on: (a) Loans and advances (b) External loans raised by the central government (c) Subsidies (d) All of the above 42. Capital transactions are of (a) Flow (c) Both flow and stock

nature: (b) Stock (d) None of the above

43. Dangers of public debt may be: (a) It is a threat to political freedom (b) It is a burden on common man (c) It results in drain of wealth (d) All of the above

Model Test Paper I

P.7

44. FEMA stands for: (a) Foreign Earnings Management Act (b) Foreign Exchange Management Act (c) Foreign Exchange and Management Activities (d) Forward Earning and Management Act 45. When government retains stake upto 26% in the PSU to protect its interest, it is called: (a) Warehousing (b) Cross-holding (c) Golden share (d) Strategic sale 46. Advantage of outsourcing is: (a) It is cheaper to contract services from developing countries (b) There is easy availability of skilled manpower at lower wage rate (c) Both of the above (d) None of the above 47. Current membership of IMF is: (a) 184 countries (b) 180 countries (c) 149 countries (d) None of the above 48. Which function of money removes the difficulty of double coincidence of wants? (a) Medium of exchange (b) Measure of value (c) Standard of deferred payments (d) All of the above 49. Agency services can be: (a) Purchase and sale of shares and securities (b) Making regular payments such as insurance premium (c) Collection of cheques and bills (d) All of the above 50. What can RBI do to improve efficiency of the banking system? (a) It can being about compulsory amalgamation of weak banks (b) It can claim for compulsory liquidation (c) It can expedite winding up of proceedings to safeguard the interest of depositors (d) All of the above

Model Test Paper II 1. Who gave wealth definition of Economics? (a) Adam Smith (c) Samuelson (b) Alfred Marshall (d) Robbins 2. Ethics is: (a) Positive economics (b) Normative economics (c) Both positive and normative economics (d) None of the above 3. When we start with particular facts and then makes general theory, it is called: (a) Deductive method (b) Inductive method (c) Partial equilibrium method (d) None of the above 4. Merits of inductive method of economic theory can be: (a) Realistic and reasonable method (b) Verifies economic facts (c) Scientific method (d) All of the above 5. If earthquake takes place, then what will happen to PPC? (a) Shift inward (b) Remains same (c) Shift outward (d) All of the above 6. What kind of relationship exist between demand for a good and price of its substitute goods? (a) Direct (b) Inverse (c) No effect (d) Can be direct or inverse

P.2 MCQs in Economics

7. Expansion of demand is shown by: (a) Upward movement on the demand curve (b) Downward movement on the demand curve (c) Rightward shift of the demand curve (d) Leftward shift of the demand curve 8. The absolute value of the coefficient of elasticity of demand ranges from: (a) Zero to infinity (b) Minus infinity to plus infinity (c) Zero to infinity (d) One to infinity 9. As the consumer has more units of a commodity, his total utility from the commodity: (a) Increases less than in proportion, reaches a maximum and then falls (b) Increases less than in proportion and then falls (c) Increases more than in proportion and then reaches a maximum (d) Falls, becomes zero and then negative 10. Consumer surplus is the difference between: (a) Amount consumer is willing to pay minus amount actually paid by the consumer (b) Amount consumer actually paid minus the amount consumer is wiling to pay (c) Amount consumer actually paid minus the amount charged by the seller (d) Amount consumer is willing to pay minus the amount producer is wanting 11. While deriving consumer’s equilibrium, what is given? (a) Income of the consumer (b) Price of the commodities (c) Both income and price (d) None of the above

Model Test Paper II

P.3

12. When MRS is rising, what shape will indifference curve take? (a) Convex to the origin (b) Concave (c) Straight line (d) Rising 13. Supply is that part of stock which: (a) Seller is ready to sell at a certain price during a certain time (b) Seller is ready to sell (c) Wholesaler is ready to sell to retailers (d) Wholesaler is ready to sell to buyers 14. If value of ES < 1, it is called: (a) Elastic supply (b) Inelastic supply (c) Perfectly elastic supply (d) Perfectly inelastic supply 15. A firm earns a revenue of Rs 50 when the market price of a good is Rs 10. The market price increases to Rs 15 and the firm now earns a revenue of Rs 150. What is the price elasticity of the firm’s supply curve? (a) 2 (b) 1 (c) 3 (d) 4 16. Voluntary services is an example of: (a) Form utility (b) Time utility (c) Place utility (d) All of the above 17. Feature of labour: (a) It cannot be stored (b) Labourer has to work in person (c) Labourer sells his service (d) All of the above 18. What should be done after savings have been created? (a) Investment of savings (b) Mobilisation of savings (c) Both investment and mobilisation of savings (d) None of the above 19. Short-run production function means: (a) At least one factor is in fixed supply (b) Two factor are in fixed supply (c) All factors are in fixed supply (d) One factor is in variable supply

P.4 MCQs in Economics

20. When AC = MC, AC is (a) Minimum (b) Falling

. (c) Rising

(d) Maximum

21. Any point above long-run AC is . (a) Showing more cost (c) Inefficient (b) Attainable (d) All of the above 22. When long-run AC is falling, it is tangent to short-run AC curve: (a) Falling portion (b) Rising portion (c) Minimum point (d) Can be any of the situation given above.

of the

23. When there are two sellers what is the market structure called? (a) Oligopoly (b) Monopoly (c) Trupoly (d) Duopoly 24. What brings about pure competition? (a) Large number of buyers and sellers (b) Homogenous product (c) Free entry and exit of firms (d) All of the above 25. Relationship between MR, AR and elasticity of demand is: (a) AR = MR Ê 1 - 1 ˆ Ë e¯

Ê ˆ (b) MR = e Á 1 - 1 ˜ p¯ Ë

(c) MR = AR Ê 1 - 1 ˆ Ë e¯

(d) MR = AR (1 – e)

26. The maximum price consumer is willing to pay to maximise satisfaction is equal to: (a) MU of the commodity (b) MC of the commodity (c) Purchasing power of the consumer (d) None of the above 27. When both demand and supply increases in the same propor. tion then equilibrium price will (a) Remain the same (b) Rise (c) Fall (d) None of the above

Model Test Paper II

28. Change in supply means supply can have: (a) Increase (b) Expansion (c) Contraction (d) Expansion or contraction 29. Under monopolistic competition, shape of TR curve is: (a) Horizontal (b) Inverted-U shaped (c) Straight positively sloping line from origin (d) Inverse-S shaped 30. For (a) (b) (c) (d)

price discrimination, it is essential that: There is no contact among buyers There is imperfect competition in the market The elasticity of demand is different in different markets All of the above

31. The ‘Kink’ in the demand curve occurs at the: (a) Prevailing price (b) Prevailing output (c) Prevailing price and output (d) Price which is determined by the model 32. When and by whom was HDI introduced? (a) In 1990 by UNDP (b) In 1989 by World bank (c) In 1990 by UNO (d) In 1989 by IMF 33. Green resolution stressed upon: (a) Use of HYV seeds (b) Use of fertilizers (c) Use of pesticides (d) All of the above 34. Domestic factor income include: (a) Compensation of employees (b) Operating surplus (c) Mixed income (d) All of the above 35. Indirect tax is like: (a) Excise duty (c) Sales tax

(b) Custom duty (d) All of the above

P.5

P.6 MCQs in Economics

36. Stage III of demographic transition occurs in: (a) Primitive agrarian economies (b) Developed economies (c) Developing economies (d) Less developed economies 37. Official data on poverty is made available by: (a) Planning Commission (b) Finance Ministry (c) Central Statistical Organisation (d) Rajya Sabha 38. Low employment among women is a reflection of: (a) Economic backwardness of a country (b) Use of capital intensive technology (c) Cultural and social norms of a country (d) All of the above 39. Agriculture sector has share of 9% in total commercial energy. It shows that: (a) People are smart users of energy (b) Agriculture has low degree of mechanisation (c) There is development of advanced energy efficient technology in agriculture (d) All of the above 40. In case of cost-push inflation: (a) Demand curve shifts to the right (b) Demand curve shifts to the left (c) Supply curve shifts to the left (d) Supply curve shifts to the right 41. Revenue expenditure may be on: (a) Subsidies (b) Non-interest expenditure (c) Interest expenditure (d) All of the above 42. Amortization of capital means: (a) Purchase and resale of securities sold to the foreigners (b) Purchase and resale of securities sold to the people of the country

Model Test Paper II

P.7

(c) Only resale of securities sold to the people of the country (d) Only purchase of securities sold to the people of the country 43. Debt trap means: (a) More aid is needed to meet the debt servicing requirements (b) More debt is needed to finance developmental expenditure (c) More debt is needed to finance war expenses (d) All of the above 44. EPCG stands for: (a) Export Promotion Capital Goods (b) Export Promotion Council of the Government (c) Earnings Promotion Capital Goods (d) Export Promotion of Country’s Goods 45. When the government sells a major portion of its stake to a strategic buyer and also gives out the management control, it is called: (a) Strategic sale (b) Cross-holding (c) Warehousing (d) Golden share 46. Some services outsourced from India are: (a) Banking services (b) Voice-based business processes (c) Music recording (d) All of the above 47. Current membership of WTO is: (a) 149 countries (b) 184 countries (c) 185 countries (d) None of the above 48. When money works as a common denominator into which the values of all goods and services are expressed, it is which function of money? (a) Medium of exchange (b) Measure of value (c) Standard of deferred payments (d) All of the above

P.8 MCQs in Economics

49. Current account deposit is also called: (a) Demand deposit (b) Time deposit (c) Cumulative deposit (d) Accumulated deposit 50. When RBI is lender of last resort, what does it mean? (a) RBI advances necessary credit against eligible securities (b) Commercial banks give fund to the RBI (c) RBI advances money to public whenever there is any emergency (d) All of the above