Economics GK Quiz-11

141. The supply of labour in the economy depends on
(1) Population
(2) National income
(3) Per capita income
(4) Natural resources
Answer:
141. (1) The supply curve for labor depends on variables
such as population, wage rates, etc. in developing
countries, the vast population base explains the relatively lower wage rates and easy accessibility to labour supply. This is just the opposite in the case of
developed countries.


142. Which one of the following pairs of goods is an example for Joint Supply ?
(1) Coffee and Tea
(2) Ink and Pen
(3) Tooth brush and Paste
(4) Wool and Mutton
Answer:
142. (4) The production of two or more goods simultaneously
from the same imputs is called Joint Supply. Wool
and Mutton are an example for joint supply.


143. Consumer’s surplus is the highest in the case of:
(1) durable goods 
(2) luxuries
(3) comforts 
(4) necessities
Answer:
143. (4) Consumer surplus is the difference between the
price consumers would be prepared to pay and the
actual market price.


144. Real wage is :
(1) Profit price level 
(2) Rent price level
(3) Interest price level 
(4) Money wage price level
Answer:
144. (4) If a person’s wage rises by ten per cent and prices
rise by more than ten per cent, his real wage goes
down.


145. Which of the following cost curve is never ‘U’ shaped ?
(1) Marginal cost curve
(2) Average variable cost curve
(3) Average fixed cost curve
(4) Average cost curve
Answer:
145. (3) Average fixed cost curve is never ‘U’ shaped. Since
total fixed costs are unchanged as output rises, the
average fixed cost curve falls continuously as output
is increased.


146. Kinked demand curve is a feature of
(1) Monopoly 
(2) Oligopoly
(3) Monopsony 
(4) Duopoly
Answer:
146. (2) The kinked demand curve theory is an economic
theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain
sticky prices.


147. Demand for complementary goods is known as
(1) Joint demand
(2) Derived demand
(3) Direct demand
(4) Cross demand
Answer:
147. (1) Demand for complementary goods is called Joint
Demand. Joint Demand is the demand in which goods
are related in such a way that an increase in the
demand for one causes an increase in the demand
for the other.


148. Plant and machinery are
(1) Producers’ goods
(2) Consumers’ goods
(3) Distributors’ goods
(4) Free goods
Answer:
148. (1) Plant and machinery are Producers’ goods. Together with stocks and work in progress, these goods
are collectively termed ‘Capital’.


149. Which activity is not included in production ?
(1) Production of wheat by a farmer
(2) Production of medicines by a company
(3) Services given by a nurse in hospital
(4) Services done by a house-wife in her own house
Answer:
149. (4) Services done by a house-wife in her own house
are not included in production.


150. The addition to total cost by producing an additional unit of output by a firm is called
(1) Variable cost
(2) Average cost
(3) Marginal cost
(4) Opportunity cost
Answer:
150. (3) The addition to total cost by producing an additional unit of output by a firm is called Marginal cost.
Average cost is the total cost of producing a given
output divided by that output.


151. In a perfectly competitive market, a firm’s
(1) Average Revenue is always equal to Marginal Revenue
(2) Marginal Revenue is more than Average Revenue
(3) Average Revenue is more than Marginal Revenue
(4) Marginal Revenue and Average Revenue are never equal
Answer:
151. (1) Average revenue is the amount money received by
a firm per unit of output sold. Marginal revenue is
the change in total revenue resulting from a small
change in the quantity sold. In a perfectly competitive market, a firm’s Average Revenue is always equal
to Marginal Revenue.


152. Micro-economics is also called :
(1) Income theory
(2) Investment theory
(3) Price theory
(4) Expenditure theory
Answer:
152. (3) Microeconomics is the branch of economics concerned with isolated parts of the economy, for example, individual people, firms or industries. It involves
such topics as the theory of prices and of the firm.


153. Demand in Economics means :
(1) Aggregate demand
(2) Market demand
(3) Individual demand
(4) Demand backed by purchasing power
Answer:
153. (4) ‘ Demand ’ in Economics refers to the quantity of a
good or service consumers ate able and willing to buy
at a given price in a given market during a specified
time period , other things beings equal.


154. A market in which there are a few number of large firms is called as
(1) Duopoly 
(2) Competition
(3) Oligopoly 
(4) Monopoly
Answer:
154. (3) Duopoly means a market in which two producers
of the same good are predominantly powerful. In some
theries, the term is used specifically to denote the
existence of only two suppliers of a good.ECONOMICS
SGAE–610
Competition refers to a condition in a market in
which firms are attempting to increase their profits
at the expense of their rivals.
Oligopoly refers to a market that is dominatted by a
few firms producing differentiated products.
Monopoly refers to a market in which there is only
one supplier and no other firms are able to enter.
According to the Fair Trading Act, 1973, Monopoly is
defined as any firm (or group of firms acting together)
that accounts for 25 percent or more of the market
output of a good or service.


155. Number of sellers in the monopoly market structure is
(1) few 
(2) large
(3) one 
(4) two
Answer:
155. (3) Monopoly refers to a market in which there is only
one supplier and no other firms are able to enter.


156. When percentage change in demand for a commodity is less than percentage change in its price,
then demand is said to be
(1) Highly elastic
(2) Inelastic
(3) Relatively elastic
(4) Perfectly inelastic
Answer:
156. (2) When the percentage change in quantity demanded is less than the percentage change in price, then
the demand for the commodity is said to be inelastic.
Price elasticity of demand refers to the degree of responsiveness of quantity demanded to change in price.


157. Who propounded Dynamic Theory of profit ?
(1) Clark 
(2) Schumpeter
(3) Knight 
(4) Hawly
Answer:
157. (1) Dynamic Theory of Profit is associated with the
name of an American Economist J. B. Clark. In the
world of reality, according to J. B. Clark profit arises
only in a dynamic economy.


158. The remuneration of the entrepreneur in production is
(1) Pure profit
(2) Gross profit
(3) Net profit
(4) Super-normal profit
Answer:
158. (3) Economists divide the factors of production into
four categories: land, labor, capital, and entrepreneurship. An entrepreneur is a person who combines the
other factors of production – land, labor, and capital
– to earn a profit. His profit is in the form of Net
Profit which is achieved by deducting other elements
(such as planning the production, producing the commodities on the basis of demand, looking after efficient distribution) from the gross profit.


159. Elasticity (e) expressed by the formula l > e > 0 is
(1) Perfectly elastic
(2) Relatively elastic
(3) Perfectly inelastic
(4) Relatively inelastic
Answer:
159. (4) Elasticity (e) expressed by the formula 1 > e > 0 is
relatively inelastic. Elasticity is responsiveness of one
variable to a change in another, when other conditions
are held constant.


160. Who developed the innovations theory of profit ?
(1) Walker 
(2) Clark
(3) Knight 
(4) Schumpeter
Answer:
160. (4) Joseph Alois Schumpeter (1883-1950) was Austrian-born American economist and social scientist. He
did important early analyses of business cycles and
economic growth. He pinpointed technical innovation
as the chief contributor to growth. In Capitatism, Socialism and Democracy (1942), he argued that capitalism would naturally evolve into socialism through its
very success.


161. In the case of an inferior good, the income elasticity of demand is :
(1) Zero 
(2) Negative
(3) Infinite 
(4) Positive
Answer:
161. (2) A negative income elasticity of demand is associated with inferior goods; an increase in income will
lead to a fall in the demand and may lead to changes
to more luxurious substitutes. A positive income elasticity of demand is associated with normal goods; an
increase in income will lead to a rise in demand.


162. The principle of maximum social advantage is the basic principle of
(1) Micro Economics
(2) Macro Economics
(3) Fiscal Economics
(4) Environmental Economics
Answer:
162. (3) The ‘Principle of Maximum Social Advantage’, introduced by British economist Hugh Dalton, is the
fundamental principle of Public Finance which implies that all the financial operations of the state should
aim at maximization of net social benefit. It takes into
consideration both the aspects of public finance that
is the government revenue or taxation as well as government expenditure. Since it studies problems related to government taxation and spending, it comes
under the domain of fiscal economics.


163. Diamonds are priced higher than water because :
(1) they are sold by selected firms with monopolistic powers.
(2) their marginal utility to buyers is higher than that of water.
(3) their total utility to buyers is higher than that of water.
(4) consumers do not buy them at lower prices.
Answer:
163. (2) The water diamond paradox or puzzle was a mystery of Adam Smith who observed that the price of
diamonds was much higher than that of water even
though water seemed to offer for more utility than
diamonds. The resolution of this puzzle or paradox is
based on the distinction between marginal utility and
total utility. The marginal utility of diamonds is very
high and so consumers are willing to pay higher prices for diamond, than for water.


164. Bilateral monopoly refers to the market situation of
(1) two sellers, two buyers
(2) one seller and two buyers
(3) two sellers and one buyer
(4) one seller and one buyer
Answer:
164. (4) In a bilateral monopoly there is both a monopoly (a
single seller) and monopsony (a single buyer) in the
same market. The one supplier tends to act as a monopoly power, and looks to charge high prices to the
one buyer. The lone buyer looks towards paying a
price that is as low as possible. Since both parties
have conflicting goals, the two sides negotiate based
on the relative bargaining power of each, with a final
price settling in between the two sides’ points of maximum profit.


165. Production function refers to the functional relationship between input and ___.
(1) product 
(2) produce
(3) output 
(4) service
Answer:
165. (3) The Production function expresses a functional relationship amidst quantities of raw materials and goods.
It is the name given to the relationship between rates
of input of productive services and the rate of output
of product.


166. The demand for necessities is
(1) elastic
(2) perfectly inelastic
(3) inelastic
(4) perfectly elastic
Answer:
166. (2) Inelastic demand means that if the price changes,
the quantity demanded will not change much. The
more necessary a good is, the lower the elasticity, as
people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly
inelastic demand.


167. If a good has negative income elasticity and positive price elasticity of demand, it is a
(1) giffen good
(2) normal good
(3) superior good
(4) an inferior good
Answer:
167. (1) A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual
type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically
consume more of as the price rises, violating the law
of demand. When price goes up, the quantity demanded also goes up.


168. The opportunity cost of a factor of production is
(1) what it is earning in its present use.
(2) what it can earn in the long period.
(3) what has to be paid to retain it in its present use.
(4) what it can earn in some other use.
Answer:
168. (4) The opportunity cost of a choice is the value of the
best alternative forgone, in a situation in which a choice
needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alternative uses.


169. The demand for labour is called
(1) Market demand
(2) Direct demand
(3) Derived demand
(4) Factory demand
Answer:
169. (3) The demand for labour is “derived” from the production and demand for the product being demanded. If the demand for the product increases, either
the price will increase or the demand for production
labour will increase until the equilibrium price and
production numbers are met. Labour is “derived” from
the market demand for the product.


170. If a firm is operating at loss in the short-period in perfect combination, it should :
(1) decrease the production and the price.
(2) increase the production and the price
(3) continue to operate as long as it covers even the variable costs.
(4) shut-down and leave the industry
Answer:
170. (3) The situation when a firm is operating at loss in
the short period in perfect competition arises when
the price is so low that total revenue is not even enough
to cover the variable cost of production. Shut down
point is that point at which the price is equal to average variable costs or the firm covers its variable costs.
So it should operate as long as it covers even the
variable costs.


171. At “Break-even point”,
(1) the industry is in equilibrium in the long-run.
(2) the producers suffers the minimum losses
(3) the seller earns maximum profit
(4) the firm is at zero-profit point
Answer:
171. (4) The break-even point (BEP) is the point at which
cost or expenses and revenue are equal: there is no
net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first
major step towards profitability.


172. The basic object of all production is to
(1) satisfy human wants
(2) provide employment
(3) make profits
(4) increase physical output
Answer:
172. (1) According to Adam Smith, consumption is the sole
end and purpose of all production. The goal of production is the satisfaction of human desire. All the
processes, by which human labor creates goods and
services, bring them to the ultimate consumer.ECONOMICS
SGAE–611


173. The equilibrium of a firm under perfect competition will be determined when
(1) Marginal Revenue > Average Cost
(2) Marginal Revenue > Average Revenue
(3) Marginal Revenue = Marginal Cost
(4) Marginal Cost > Average Cost
Answer:
173. (3) When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maximized. Equilibrium in perfect competition is the point
where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.


174. Expenditure on advertisement and public relations by an enterprise is a part of its
(1) consumption of fixed capital
(2) final consumption expenditure
(3) intermediate consumption
(4) fixed capital
Answer:
174. (3) Expenditure on advertisement and public relations
by an enterprise is a part of its intermediate consumption. These are treated as intermediate goods
and services which form part of the cost of producing other goods. Intermediate consumption consists
of the total monetary value of goods and services consumed or used up as inputs in production by enterprises, including raw materials, services and various
other operating expenses.


175. Elasticity of demand with respect to price is
(1) elasticity = %changein demand %change in price
(2) elasticity = %changein price %change in demand
(3) elasticity = %change indemand %change insupply
(4) elasticity = %changeinsupply change in price
Answer:
175. (1) Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness,
or elasticity, of the quantity demanded of a good or
service to a change in its price. The formula for the
coefficient of price elasticity of demand for a good is:
e
(R) =
DQ Q
dP P
/ /
, where e(R) = Elasticity of demand; dQ/
Q= % change in demand and dP/P= % change in
price.


176. Cross demand expresses the
functional relationship between
(1) demand and prices of related
commodities.
(2) demand and income.
(3) demand and prices.
(4) demand and supply,
Answer:
176. (1) Other things being constant, cross demand expresses the relation between demand for good ‘A’ due
to change in the price of its related good ‘B’. It shows
that at different prices of good ‘B’ what different quantities of good A’ will be demanded.


(SSC (10+2) Level DEO & LDC
Exam. 27.10.2013)
177. Third stage of Law of Variable
Proportion is called
(1) negative returns
(2) positive returns
(3) constant returns
(4) increasing returns
Answer:
177. (1) The stages of Law of Variable Proportion are: Stage
1: Increasing return; Stage 2: Diminishing return;
and Stage 3: Negative Return. In the third stage Marginal Product of variable factor is zero. In this stage
the Total Product starts diminishing.


(SSC (10+2) Level DEO & LDC
Exam. 27.10.2013)
178. Tha Law of Demand is based on
(1) Manufacturer’s preference
(2) Seller’s preference
(3) Supplier’s preference
(4) Consumer’s preference
Answer:
178. (4) The Law of Demand states that, all else being
equal, as the price of a product increases, quantity
demanded lowers; likewise, as the price of a product
decreases, quantity demanded increases. Demand is
derived from consumers’ tastes and preferences, and
it is bound by income. In other words, given a limited
income, the consumer must decide what goods and
services to purchase. Each consumer will purchase
different things because individual preferences and
incomes differ.


(SSC (10+2) Level DEO & LDC
Exam. 10.11.2013, Ist Sitting)
179. A supply function expresses the
relationship between
(1) price and output
(2) price and selling cost
(3) price and demand
(4) price and consumption
Answer:
179. (1) The supply function expresses the relationship
between the total quantity supplied and the price received by all suppliers per unit of time, holding other
factors constant. It illustrates the relation between
price and supply.
The diagram (Price is shown on the Y-axis and Quantity per day on the X-axis) shows that suppliers will
produce quantity Q1 units of a good if the price they
receive is P
1. As the price keeps decreasing, the quantity produced also keeps on decreasing. So though
the supply function has to do with supply and price,
it can be perceived to express similar functional relationship between price and output (in terms of quantity that will be produced).


(SSC (10+2) DEO & LDC
Exam. 10.11.2013, IInd Sitting)
180. Goods which are meant either for
consumption or for investment
are called
(1) Final goods
(2) Giffen goods
(3) Inferior goods
(4) Intermediate goods
Answer:
180. (1) All goods which are meant either (i) for consumption by consumers or (ii) for investment by firms are
called final goods. They are finished goods, meant for
final use. These are neither resold nor do they enter
into further stages of production. Cars, television sets,
cloth, food, machinery, equipments etc. are final
goods.


(SSC (10+2) Level DEO & LDC
Exam. 10.11.2013, IInd Sitting)ECONOMICS
SGAE–567
181. “Marginal Cost” equals
(1) total cost minus total benefit
for the last unit produced
(2) total cost divided by total benefit for the last unit produced
(3) total cost divided by quantity
(4) the change in total cost divided by the change in quantity
Answer:
181. (4) Marginal cost is the change in the total cost that
arises when the quantity produced has an increment
by unity. That is, it is the cost of producing one more
unit of a good. To illustrate marginal cost let’s assume that the total cost of producing 10,000 units is
Rs. 50,000. If we produce a total of 10,001 units the
total cost is Rs. 50,002. That would mean the marginal cost—the cost of producing the next unit—was
Rs. 2.


(SSC (10+2) Level DEO & LDC
Exam. 10.11.2013, IInd Sitting)
182. Extreme forms of markets are
(1) Perfect competition; Oligopoly
(2) Oligopoly; Monopoly
(3) Perfect competition; Monopoly
(4) Perfect competition; Monopolistic competition
Answer:
182. (3) There are two extreme forms of market structure:
monopoly and, its opposite, perfect competition. Perfect competition is characterized by many buyers and
sellers, many products that are similar in nature and,
as a result, many substitutes. A monopoly is a market structure in which there is only one producer/
seller for a product.


(SSC (10+2) Level DEO & LDC
Exam. 10.11.2013, IInd Sitting)
183. Minimum payment to factor of
production is called
(1) Quasi Rent
(2) Rent
(3) Wages
(4) Transfer Payment
Answer:
183. (4) In economics, factors of production are the inputs
to the production process. There are three basic factors of production: land, labour, capital. The payment
for use and the received income of a land owner is
rent. The payment for someone else’s labor and all
income received from one’s own labor is wages. The
modern theory of rent is that it is the difference between the actual earning of a factor unit over its transfer earnings. So the Transfer earnings are the minimum payment required to keep a factor of production in its present use. It is also known as opportunity cost.


(SSC Multi-Tasking Staff
(Patna) Exam. 16.02.2014)
184. Quasi rent is a_________ phenomenon.
(1) medium term (2) long term
(3) short term (4) no time
Answer:
184. (3) Quasi-rent is a term in economics that describes
certain types of returns to firms. It differs from pure
economic rent in that it is a temporary phenomenon.
It can arise from the barriers to entry that potential
competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.


(SSC Multi-Tasking Staff
(Patna) Exam. 16.02.2014)
185. Which of the following economists is called the Father of Economics ?
(1) Malthus (2) Robinson
(3) Ricardo (4) Adam Smith
Answer:
185. (4) Adam Smith, a Scottish moral philosopher and a
pioneer of political economy, is cited as the “father of
modern economics.” He is best known for two classic
works: The Theory of Moral Sentiments (1759), and
An Inquiry into the Nature and Causes of the Wealth
of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.ECONOMICS
SGAE–612


(SSC Multi-Tasking (Non-Tech.) Staff
Exam. 23.02.2014, IInd Sitting)
186. Returns to scale is a
(1) timeless phenomenon
(2) directionless phenomenon
(3) short-run phenomenon
(4) long-run phenomenon
Answer:
186. (4) Returns to Scale refers to changes in production
that occur when all resources are proportionately
changed in the long run. It comes in three forms--
increasing, decreasing, or constant based on whether the changes in production are proportionally more
than, less than, or equal to the proportional changes
in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.


(SSC Multi-Tasking (Non-Tech.) Staff
Exam. 23.02.2014, IInd Sitting)
187. Rent is a factor payment paid to
(1) land (2) restaurant
(3) building (4) factory
Answer:
187. (1) Factor Payments refer to payments made to scarce
resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of
labor; interest is the payment for the services of capital, rent is the services for land, and profit is the
factor payment to entrepreneurship.


(SSC Multi-Tasking (Non-Tech.) Staff
Exam. 23.02.2014, IInd Sitting)
188. An increase in the quantity supplied suggests :
(1) a leftward shift of the supply
curve
(2) a movement up along the supply curve
(3) a movement down along the
supply curve
(4) a rightward shift of the supply curve
Answer:
188. (2) Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain
price. But unlike the law of demand, the supply relationship shows an upward slope. This means that
the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at an higher price
increases revenue.


(SSC CGL Tier-I
Re-Exam–2013, 27.04.2014)
189. Price and output are determinates in market structure other
than
(1) monopoly
(2) perfect competition
(3) oligopoly
(4) monopsony
Answer:
189. (2) Perfect competition is a form of market in which
there are a large number of buyers and sellers competing with each other in the purchase and sale of
goods, respectively and no individual buyer or seller
has any influence over the price and output. Each
firm’s output is a perfect substitute for the output of
the other firms, so the demand for each firm’s output
is perfectly elastic. Product differentiation holds the
key in this type of market structure.


(SSC CAPFs SI, CISF ASI & Delhi
Police SI Exam. 22.06.2014)
190. If average cost falls, marginal
cost
(1) increases at a higher rate
(2) falls at the same rate
(3) increases at a lower rate
(4) falls at a higher rate
Answer:
190. (2) Average cost is the per unit cost incurred in the
production of a good or service. It is specified as the
total cost divided by the quantity of output. The marginal cost (the additional, cost of producing one more
unit of output) and average cost are related. So when
average total cost rises, marginal cost also rises; when
average cost curve falls with the increase in output,
the marginal cost also rises.

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