Economics GK Quiz-12

191. Consumer gets maximum satisfaction at the point where
(1) Marginal Utility = Price
(2) Marginal Utility > Price
(3) Marginal Utility < Price
(4) Marginal Cost = Price
Answer:
191. (1) As per the law of diminishing marginal utility, the
utility of each successive unit goes on diminishing as
more and more units of a commodity are consumed.
A rational consumer will consume the commodity up
to a point where the marginal utility of the final unit
of the commodity is equal to the marginal utility of
money (in terms of price) paid for it. In this way, the
consumer will get the maximum satisfaction and will
be in equilibrium.


(SSC CAPFs SI, CISF ASI & Delhi
Police SI Exam. 22.06.2014)
192. Production function is the relationship between
(1) Production and Profit
(2) Production and Prices
(3) Production and Production
factors
(4) Production and Income
Answer:
192. (3) In economics, a production function relates physical output of a production process to physical inputs
or factors of production. The primary purpose of the
production function is to address allocative efficiency
in the use of factor inputs in production and the resulting distribution of income to those factors.


(SSC CAPFs SI, CISF ASI & Delhi
Police SI Exam. 22.06.2014)
193. Any factor of production can earn
economic-rent, when its supply
will be
(1) Perfectly elastic
(2) Perfectly inelastic
(3) Elastic in nature
(4) All of the above
Answer:
193. (2) Economic rent is the revenue that can be earned
from the land or other natural resource for which
there is a fixed supply — as economists like to say,
the supply is perfectly inelastic. Because the supply
is perfectly inelastic, the amount of its supply does
not depend on any income that the resource can produce.


(SSC CAPFs SI, CISF ASI & Delhi
Police SI Exam. 22.06.2014)
194. The father of Economics is
(1) Marshall (2) Adam Smith
(3) J.M. Keynes (4) Karl Marx
Answer:
194. (2) Adam Smith is known as ‘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).


(SSC CGL Tier-I Re-Exam. (2013)
20.07.2014, Ist Sitting)
195. The sale of branded articles is
common in a situation of
(1) excess capacity
(2) monopolistic competition
(3) monopoly
(4) pure competition
Answer:
195. (2) Monopolistic competition is a type of imperfect
competition such that many producers sell products
that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes.
Textbook examples of industries with market structures similar to monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in large cities.


(SSC CGL Tier-I Re-Exam. (2013)
20.07.2014, Ist Sitting)
196. Production refers to
(1) destruction of utility
(2) creation of utilities
(3) exchange value
(4) use of a product
Answer:
196. (2) Production refers to “the creation of utility having
value-in-exchange.” The process of production may
create six types of utilities: form utility, time utility,
place utility, ownership utility, service utility and
knowledge utility.


(SSC CGL Tier-I Re-Exam. (2013)
20.07.2014, Ist Sitting)
197. The law of diminishing returns
applies to
(1) All sectors
(2) Industrial sector
(3) Agricultural sector
(4) Service sector
Answer:
197. (1) The classical economists were of the opinion that
– the law of diminishing returns applies only to agriculture and to some extractive industries, such as
mining, fisheries urban land, etc. However, it is applicable to other sectors such as manufacturing as
well.


(SSC CGL Tier-I Re-Exam. (2013)
20.07.2014, Ist Sitting)
198. The study of factor pricing is
alternatively called the theory of
(1) functional distribution
(2) personal distribution
(3) income distribution
(4) wealth distribution
Answer:
198. (1) In economics, the study of factor pricing is related
to the theory of functional distribution which attempts
to explain the prices of land, labour, and capital. It
sees the demand for land, labour, and capital as derived demand, stemming from the demand for final
goods.


(SSC CGL Tier-I Re-Exam. (2013)
20.07.2014, IInd Sitting)
199. In a free enterprise economy,
resource allocation is determined by
(1) the pattern of consumers’
spending
(2) the wealth of the entrepreneurs
(3) decision of the Government
(4) the traditional employment of
factors
Answer:
199. (1) In a free market economy, resources are allocated
through the interaction of free and self-directed market forces. This means that what to produce is determined by consumers’ capacity to spend. How to produce is determined by producers, and who gets the
products depends upon the purchasing power of consumers.


(SSC CGL Tier-I Re-Exam. (2013)
20.07.2014, IInd Sitting)
200. Buyers and Sellers will have
perfect knowledge of market
conditions under
(1) Duopoly
(2) Perfect competition
(3) Monopolistic competition
(4) Oligopoly
Answer:
200. (1) Complete market information is one of the main
features of Perfect Competition. This condition implies close contact between buyers and sellers. Both
of them possess complete knowledge about the prices at which goods are being bought and sold, and the
prices at which others are prepared to buy or sell.


(SSC CGL Tier-I Re-Exam. (2013)
20.07.2014, IInd Sitting)ECONOMICS
SGAE–568
201. In short run, if a competitive firm
incurs losses, it will
(1) stop production.
(2) continue to produce as long
as it can cover its variable
costs.
(3) raise price of its product.
(4) go far advertising campaign.
Answer:
201. (1) In the short run, a firm that is operating at a loss
(where the revenue is less that the total cost or the
price is less than the unit cost) must decide to operate or temporarily shutdown. It will shutdown if
the sale of the goods or services produced cannot
even cover the variable costs of production.


(SSC GL Tier-I
Exam. 19.10.2014, Ist Sitting)
202. If the average revenue is a horizontal straight line, marginal
revenue will be
(1) U shaped
(2) Kinked
(3) Identical with average revenue
(4) L shaped
Answer:
202. (3) The price of a good is also known as the Average
Revenue of the firm. Average Revenue (AR) or Price
and Marginal Revenue (MR) are identical. When the
former is constant, the latter is also constant. Moreover, the Average Revenue curve of a firm is the same
as the individual demand curve. Hence, the competitive demand curve is a horizontal straight line parallel to the OX axis.ECONOMICS
SGAE–613


(SSC GL Tier-I Exam. 19.10.2014)
203. The demand of a factor of production is
(1) direct (2) derived
(3) neutral
(4) discretion of the producer
Answer:
203. (2) There are 4 factors of production; land, labor, capital
and entrepreneurship. The demand for the factors of
production is a derived demand. That means these
factors of production are demanded because there is
a demand for the end product they produce.


(SSC GL Tier-I Exam. 19.10.2014)
204. A unit price elastic demand
curve will touch
(1) both price and quantity axis
(2) neither price axis, nor quantity axis
(3) only price axis
(4) only quantity axis
Answer:
204. (2) Unit elastic refers to an elasticity alternative in
which any percentage change in price cause an equal
percentage change in quantity. In other words, any
change in price, whether big or small, triggers exactly the same percentage change in quantity. However,
the unit price elastic demand curve does not touch
either price axis or quantity axis.
0
1
Quantity
Perfectly Inelastic
Relatively Inelastic
Unit Elastic
Relatively Elastic
Perfectly Elastic
Price
2 3 4 5 6 7 8 9 10
86 42
10
12
14
16
18
20


(SSC GL Tier-I Exam. 26.10.2014)
205. If the supply curve is a straight
line passing through the origin,
then the price elasticity of supply will be
(1) less than unity
(2) infinitely large
(3) greater than unity
(4) equal to unity
Answer:
205. (4) Any straight line supply curve passing through the
origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed
below:
Elasticity Description Effect on quantity
supply of 1% increase in price
Zero Perfectly inelastic
(vertical straight line)
Between 0 In elastic Increased by
and 1 less than 1%
1 Unitary elastic (Increased by exactly 1%
Greater Elastic Increased by more
than 1 than 1%
Infinity Perfectly elastic Infinite increase
(horizontal straight
line)


(SSC GL Tier-I Exam. 26.10.2014)
206. According to Modern Theory of
Rent, rent accrues to
(1) capital only (2) any factor
(3) labour only (4) land only
Answer:
206. (2) Modern theory of rent does not confine itself to
the reward of only land as a factor of production as
was the case in the classical Ricardian theory of rent.
Rent in modern sense can arise in respect of any
other factor of production, i.e., labour, capital and
entrepreneurship.


(SSC GL Tier-I Exam. 26.10.2014)
207. As the number of investments
made by a firm increases, its
internal rate of return
(1) declines due to diminishing
marginal productivity.
(2) declines because the market
rate of interest will fall, ceteris paribus.
(3) increases to compensate the
firm for the current consumption foregone.
(4) increases because the level
of savings will fall.
Answer:
207. (3) Internal rates of return are commonly used to evaluate the desirability of investments or projects. The
higher a project's internal rate of return, the more
desirable it is to undertake the project. A firm (or
individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of
capital. As the number of investments increase, its
internal rate of return is greater than an established
minimum acceptable rate of return or cost of capital.


(SSC CHSL (10+2) DEO & LDC
Exam. 02.11.2014, IInd Sitting)
208. The internal rate of return
(1) must be less than the interest rate if the firm is to invest.
(2) makes the present value of
profits equal to the present
value of costs.
(3) falls as the annual yield of an
investment rises.
(4) is equal to the market interest rate for all the firm’s investment.
Answer:
208. (3) The internal rate of return on an investment or
project is the "annualized effective compounded return rate" or discount rate that makes the net present
value of all cash flows (both positive and negative)
from a particular investment equal to zero. In more
specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net
present value of the benefits (positive cash flows) of
the investment.


(SSC CHSL (10+2) DEO & LDC
Exam. 02.11.2014, IInd Sitting)
209. Which of the following occurs when
labour productivity rises ?
(1) The equilibrium nominal wage
falls.
(2) The equilibrium quantity of
labour falls.
(3) Competitive firms will be induced to use more capital
(4) The labour demand curve
shifts to the right
Answer:
209. (4) As labour productivity increases, the production
function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage,
more workers are hired and output increases. Similarly, as the capital stock increases, the production
function shifts up and simultaneously the labor demand curve shifts out and right.


(SSC CHSL (10+2) DEO & LDC
Exam. 09.11.2014)
210. Which of the following are consumer semi-durable goods ?
(1) Cars and television sets
(2) Milk and Milk products
(3) Foodgrains and other food
products
(4) Electrical appliance like fans
and electric irons.
Answer:
210. (3) Goods which are neither indestructible nor lasting
are defined as Semi Durable Goods. They fall in the
category between Durable Goods and Non Durable
Goods. Some common Semi Durable Goods are clothing or preserved foods; vehicles and electronic home
appliances are classified as Durable Goods.


(SSC CHSL (10+2) DEO & LDC
Exam. 09.11.2014)
211. Which of the following statements is correct ?
(1) Most workers will work for
less than their reservation
wage.
(2) The reservation wage is the
maximum amount any firm
will pay for a worker.
(3) Economic rent is the difference between the market
wage and the reservation
wage.
(4) Economic rent is the amount
one must pay to enter a desirable labour market.
Answer:
211. (3) The difference between the actual market wage
and the reservation wage is called economic rent.
Therefore, the lower a person’s reservation wage compared to the actual wage, the more rent they receive.
While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any person becomes unemployed (The Goals of Macroeconomic
Policy by Martin Prachowny, p. 58).


(SSC CHSL (10+2) DEO & LDC
Exam. 09.11.2014)
212. Other things being equal, a decrease in quantity demanded of
a commodity can be caused by
(1) a rise in the price of the commodity
(2) a rise in the income of the
consumer
(3) a fall in the price of a commodity
(4) a fall in the income of the
consumer
Answer:
212. (1) In economics, the law states that, all else being
equal, as the price of a product increases, quantity
demanded falls; likewise, as the price of a product
decreases, quantity demanded increases. So basically
the quantity demanded and the price of a commodity
is inversely related, other things remaining constant.


(SSC CHSL (10+2) DEO & LDC
Exam. 09.11.2014)
213. Which of the following is not an
economic problem ?
(1) Deciding between paid work
and leisure
(2) Deciding between expenditure
on one good and the other
(3) Deciding between alternative
methods of personal savings
(4) Deciding between different
ways of spending leisure
time
Answer:
213. (4) The Theory of Economic Problem states that scarcity exists in the sense that only finite and insufficient resources are available to satisfy the needs and
desires of all human beings. The fundamental economic problem is how to allocate scarce resources to
the provision of various goods and services within
the economy. The question then becomes how to determine what is to be produced, and how the factors
of production (such as capital and labor) are to be
allocated.ECONOMICS
SGAE–614


(SSC CHSL (10+2) DEO & LDC
Exam. 09.11.2014)
214. The Psychological law of consumption states that
(1) proportionate increase in
consumption is less than
proportionate increase in income
(2) increase in income is equal
to increase in consumption
(3) increase in consumption is
greater than increase in income
(4) consumption does not
change with a change in income
Answer:
214. (1) According to Keynes’ psychological law of consumption, increased aggregate consumption due to increased aggregate income – aggregate consumption
increases with increase in aggregate income but the
increase in consumption is less than the increase in
the income. This is because when the basic necessities or demand of the people are already fulfilled,
they start saving the extra additional income.


(SSC CHSL (10+2) DEO & LDC
Exam. 16.11.2014, IInd Sitting
TF No. 545 QP 6)
215. Subsidies are payment by government to
(1) Consuming units
(2) Producing units
(3) Banking units
(4) Retired persons
Answer:
215. (2) A subsidy is essentially a payment by the government to suppliers/producers that reduce their costs
of production and encourages them to increase output. Examples include a guaranteed payment on the
factor cost of a product – e.g. a guaranteed minimum
price offered to farmers; an input subsidy which subsidizes the cost of inputs used in production, etc.
However, subsidies can be given to consuming units
as well. Either way, it benefits the end use or consumer.


(SSC CHSL (10+2) DEO & LDC
Exam. 16.11.2014, IInd Sitting
TF No. 545 QP 6)
216. A low interest policy is also
known as :
(1) cheap money policy
(2) income generating
(3) dear money policy
(4) investment policy
Answer:
216. (1) Cheap money policy involves loan or credit with a
low interest rate, or the setting of low interest rates
by the central bank of the country. Cheap money is
good for borrowers, but bad for investors. Cheap
money policy was one of the primary catalysts of the
2008 recession.


(SSC CAPFs SI, CISF ASI & Delhi
Police SI Exam, 21.06.2015
(Ist Sitting) TF No. 8037731)
217. Economics classifies the manmade instrument of production
as :
(1) organization (2) capital
(3) equipment (4) labour
Answer:
217. (2) Some economists have classified factors into two
categories, land and labour (or nature and man) on
the ground that they are the only original or primary
factors. It is said that capital has no independent origin and is merely the outcome of combined efforts of
land and labour. However, other economists include
all man-made instruments for production in the category of Capital. It includes machines, tool, factories,
buildings, canals, roads, raw materials, etc, which
play vital role in production.
Land
All free gifts of nature, i.e., soil,
forests, mountains, seas. etc.
Labour
Human, physical or mental effort
done for income or material benefit
Capital
All man made means of production
like machines, tools, buildings, roads,
raw materials, etc
Entrepreneur
Human resource that helps to organize
production, i.e., takes risk and combines
land, labour and capital to produce.
FACTORS OF PRODUCTION


(SSC Constable (GD)
Exam, 04.10.2015, Ist Sitting)ECONOMICS
SGAE–569
218. A demand curve will not shift:
(1) When only income changes
(2) When only prices of substitute products change
(3) When there is a change in
advertisement expenditure
(4) When only price of the commodity changes
Answer:
218. (4) In economics, the demand curve is the graph depicting the relationship between the price of a certain
commodity and the amount of it that consumers are
willing and able to purchase at that given price. A
change in price of the commodity leads to a movement along the demand curve without shifting it. In
simple words, the increase of decrease in price of a
commodity only causes contraction or extension of
demand (increase causes contraction while decrease
cause extension). Increase or decrease in demand
only occurs only when there is a change in other determinants of demand, other than price of the commodity. So when price of the commodity changes,
demand curve does not shift; however, when any other determinant of demand changes, the demand curve
shifts either rightward or leftward.


(SSC CHSL (10+2) LDC, DEO
& PA/SA Exam, 15.11.2015
(IInd Sitting) TF No. 7203752)
219. Which law states that with constant taste and preferences, the
proportion of income spend on
food stuff diminishes as income
increases?
(1) Say’s Law
(2) Griffin’s Law
(3) Gresham’s Law
(4) Engel’s Law
Answer:
219. (4) According to Engel's Law, as disposable income of
a consumer increases, the percentage of income spent
for food decreases if all other factors remain constant. This happens even when the actual expenditure on food rises. The income elasticity of demand
of food is less than 1. A lower Engel coefficient indicates a higher standard of living.


(SSC CHSL (10+2) LDC, DEO
& PA/SA Exam, 06.12.2015
(Ist Sitting) TF No. 1375232)
220. Perfectly inelastic demand is
equal to :
(1) One (2)Infinite
(3) Zero (4)Greater than one
Answer:
220. (3) Price Elasticity of Demand is a measure of the
relationship between a change in the quantity demanded of a particular good and a change in its price.
It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity
of demand is equal to 0, demand is perfectly inelastic
(i.e., demand does not change when price changes).


(SSC CHSL (10+2) LDC, DEO
& PA/SA Exam, 06.12.2015
(IInd Sitting) TF No. 3441135)
221. A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to
(1) Zero (2) One
(3) Less than one (4) Infinity
Answer:
221. (4) Price elasticity of demand measures consumer response to price changes. If consumers are relatively
sensitive to price changes, demand is elastic; if they
are relatively unresponsive to price changes, demand
is inelastic. Perfectly inelastic demand is graphed as
a line parallel to the vertical axis; perfectly elastic
demand is shown by a line above and parallel to the
horizontal axis. When the demand for a commodity is
perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.


(SSC CHSL (10+2) LDC, DEO
& PA/SA Exam, 20.12.2015
222. ‘Capital gains’ refers to goods
which
(1) serve as a source of raising
further capital
(2) help in the further production of goods
(3) directly go into the satisfaction of human wants
(4) find multiple uses
Answer:
222. (2) Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings,
machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order
to produce consumer goods and goods for other businesses.


(SSC CGL Tier-I (CBE) Exam.
30.08.2016 (IIIrd Sitting))
223. From the national point of view,
which of the following indicates
micro approach?
(1) Study of sales of mobile
phones by BSNL
(2) Unemployement among
Women
(3) Per capita income in India
(4) Inflation in India
Answer:
223. (1) Macroeconomics is a branch of economics in which
a variety of economy-wide phenomena is thoroughly
examined such as, inflation, price levels, rate of
growth, national income, gross domestic product and
changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and
firms in making decisions regarding the allocation of
scarce resources and the interactions among these
individuals and firms. So the study of sales of mobile
phones by BSNL comes under microeconomics.


(SSC CGL Tier-I (CBE) Exam.
30.08.2016 (IIIrd Sitting))
224. Bilateral monopoly situation is
(1) when there are only two sellers of a product
(2) when there are only two buyers of a product
(3) when there is only one buyer and one seller of a product
(4) when there are two buyers
and two sellers of a product
Answer:
224. (3) Bilateral monopoly is a market consisting of a single seller (monopolist) and a single buyer
(monopsonist).For example, if a single firm produced
all the copper in a country and if only one firm used
this metal, the copper market would be a bilateral
monopoly market. The equilibrium in such a market
cannot be determined by the traditional tools of demand and supply.


(SSC CGL Tier-I (CBE) Exam.
10.09.2016 (IIIrd Sitting))
225. A ‘Market Economy’ is one which
(1) is controlled by the Government
(2) is free from the Government
control
(3) in influenced by international market forces
(4) All of these
Answer:
225. (2) A market economy is an economic system in which
economic decisions and the pricing of goods and services are guided solely by the aggregate interactions
of a country’s individual citizens and businesses. There
is little government intervention or central planning.ECONOMICS
SGAE–615
The United States is the world’s premier market economy.


(SSC CGL Tier-I (CBE) Exam.
09.09.2016 (IInd Sitting))
226. The law of demand states that
(1) if the price of a good increases, the demand for that
good decreases.
(2) if the price of a good increases, the the demand for
that good increases.
(3) if the price of a good increases, the quantity demanded of that good decreases.
(4) if the price of a good increases, the quantity demanded of that good increases.
Answer:
226. (3) The law of demand states that, other things remaining the same, the quantity demanded of a commodity is inversely related to its price. Thus, according to the law of demand, there is an inverse relationship between price and quantity demanded, other
things remaining the same.


(SSC CHSL (10+2) Tier-I (CBE)
Exam. 15.01.2017) (IInd Sitting)
227. The demand curve facing a perfectly competitive firm is
(1) downward sloping
(2) perfectly inelastic
(3) a concave curve
(4) perfectly elastic
Answer:
227. (4) A perfectly competitive industry is comprised of a
large number of relatively small firms that sell identical products. Each perfectly competitive firm is so
small relative to the size of the market that it has no
market control, it has no ability to control the price.
In other words, it can sell any quantity of output it
wants at the going market price. This translates into
a horizontal or perfectly elastic demand curve.

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