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Demand, Supply, and Price MCQs

Beingeconomist, Economics MCQs

Which is not a sufficient condition for the emergence of an economic problem.

  1. Scarcity of resources
  2. Unlimited wants
  3. Alternative uses of scarce resources
  4. Use of money

Which is not a core economic problem?

  1. How to produce
  2. How to maximize private profit
  3. What to produce
  4. For whom to produce

Who described economics as a science that studies human actions as a relationship between alternate uses of ends and means?

  1. Alfred Marshall        
  2. L. Robbins
  3. Paul A. Samuelson
  4. Joan Robinson

A mixed economy is characterized by the co-existence of:

  1. Public and private sectors
  2. Modem and traditional industries
  3. Commercial and subsistence farming
  4. Foreign and domestic investments

Which is not an essential feature of a socialist economy?

  1. Freedom of enterprise
  2. Social ownership of the means of production
  3. Government decisions
  4. Use of centralized planning

Which of the following is incorrect?

  1. Normative Economics studies how to solve the economic challenges facing society.
  2. A market necessarily refers to a meeting place between buyers and sellers
  3. A function demonstrates the association between two or more variables
  4. Equilibrium refers to the market conditions which once achieved, tend to persist 

Microeconomics deals with the:

  1. Determination of prices of goods and services
  2. Behavior of industrial decision makers
  3. Allocation of resources of the economy as between production of different goods and services
  4. All of the above

Which of the following is Microeconomics concerned with?

  1. The size of national output
  2. Changes in the general level of prices
  3. The level of employment
  4. None of the above

Formulation of an economic theory involves:

  1. Testing the hypothesis against empirical evidence
  2. Logical deductions from the assumptions made
  3. Statement of various assumptions or postulates
  4. All of the above

An economic theory is:

  1. A hypothesis
  2. An axiom      
  3. A tested hypothesis
  4. A proposition

Identify the aspect of taxation which is related to normative economics:

  1. Equity of tax
  2. Incidence of tax
  3. Effect of tax on the capacity willingness to work
  4. None of the above

Contraction of demand is the result of    

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

All but one of the following presumed that when drawing the demand curve of a person for a product, they stayed the same. What it is.

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

An example of substitutes is which of the following pairs of commodities?

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

The price elasticity of demand at the mid-point of the line will be in the case of a straight-line demand curve meeting the two axes

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

Assuming other items remain unchanged, the Law of Demand defines the relationship between

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

Demand for a commodity refers to a:

  1. Quantity of the commodity demanded at a certain price during any particular period of time
  2. Need for the commodity
  3. Desire for the commodity
  4. Quantity demanded of that commodity

Identify the factor that typically maintains a low price-elasticity of demand for a product

  1. lts low price
  2. Variety of uses for that commodity
  3. High   proportion of the consumer’s income spent on it
  4. Close  substitutes for that commodity

If the demanded quantity of a good remains constant regardless of changes in its price, then the demand curve for the commodity will be

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

In the case of a Giffen product, the curve of demand will be

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

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

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

The income elasticity of demand in case of inferior good

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

In respect of which of the following category of goods is consumer’s surplus highest?

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

Total utility is maximum when

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

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

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

The budget-line is also known as the

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

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

  1. Diminishing marginal rate of substitution
  2. Provided the scale of preferences between the two goods’ distinct combinations
  3. Consumers will often choose more to less of a specific product, other items staying the same
  4. Constant marginal utility of money

The elasticity of substitution between two perfect substitutions is

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

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

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

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

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

The Revealed Preference Theory deduces the inverse relationship between price and quantity from

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

Which of the following statements is incorrect?

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

Production is a function of:

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

An Iso-product curve slopes

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

Which cost increases continuously with the increase in production?

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

What one of the cost curves below is never Un-shaped?

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

Complete/Total costs are divided into fixed costs and variable costs in the short-term. What variable cost is one of the following?

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

In the short term, the total fixed cost rises as a company’s production         

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

A significant characteristic of the production function of Cobb Douglas is that the elasticity of substitution between inputs is

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

A vertical supply curve that is parallel to the price axis indicates that supply elasticity is

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

The supply of a commodity refers to

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

The production techniques are technically efficient:

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

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

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

Some economists refer to iso-product curves as

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

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

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

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

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

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

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

Supply elasticity refers to the degree of responsiveness of a commodity’s supply to changes in its

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

In terms of the alternative given up, the cost of one item is known as

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

According to current thinking, the law diminishing returns applies to

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

Identify the correct statement

  1. Scale economies exist only when the factors of production are indivisible.
  2. When the marginal product is equal to the average product, the average product is at its peak.
  3. The production possibility curve and the transformation curve are different curves
  4. The law of increasing returns refers to the impact of changes in the proportions of factors

Which of the above is closely associated with the notion of marginal cost?

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

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

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

A monopolist is able to maximize his profit when

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

What of the above does not constitute a basic condition of pure competition?

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

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

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

First order condition for profit maximization of a firm?

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

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

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

What the another name of average revenue curve?

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

In which market structure a firm is unable to control the price of its product?

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

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

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

The monopoly of discrimination means that the monopolist charges varying prices for his commodity

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

Price discrimination can only be efficient if the elasticity of the indifferent demand markets from which the overall market has been divided is

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

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

  1. Bertrand’s model
  2. Price leadership model
  3. Edge worth’s model
  4. Collusive model

In the sense of oligopoly, the Kinky demand curve hypothesis is intended to describe

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

Which type of market structure is characterized by interdependence between the various competing firms in decision-making

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

The situation of monopolistic competition is created by

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

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

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

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

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

Under monophony in the labor market, the supply curve of labor facing the firm will be

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

Economic rent can accrue to

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

Which of the following statements is incorrect

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

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

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

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

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

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

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

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

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

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

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

The demand for liquidity preference is governed by

  1. Speculative motives
  2. Precautionary motives
  3. Transaction motives
  4. All of the above

Identify the neo-classical theory of the rate of interest

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

The classical theory explained interest as a reward for:

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

According to  Joseph Schumpeter, profit is the reward for

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

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

  1. Reward for enterprise
  2. Earnings of management
  3. The residual income of a business
  4. Reward for innovation
Muhammad Waqas Khalid
About Him: He has done Master of Philosophy in Economics in 2016 by paying special attention to the development of research skills. He has worked as a Research Associate at the London School of Economics. He has 6 years of experience in writing. He has published many research articles and some of them got published in impact journals too. Check his work at Google Scholar: https://scholar.google.com/citations?user=RiGg9YIAAAAJ&hl=en His Expertise: He has both quantitative and qualitative expertise. He has command over different statistical packages/software i.e. SPSS, Eviews, STATA, Microfit, MS Excel, etc. and He is willing to help you out in your assignments or thesis etc.
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