Economics GK Quiz-15

101. The incomes of Indians working
abroad are a part of
(1) domestic income of India
(2) income earned from Abroad
(3) net domestic product of India
(4) gross domestic product of India
101. (3) Domestic Product is the ross money value of all
final goods and services produced in the domestic
territory of a country during a year. National Product
is the gross money value of all final goods and services produced by the normal residents of a country
during a year. It includes net factor income from

(SSC (10+2) Level Data Entry
Operator & LDC Exam. 27.10.2013)
102. Production of a commodity mostly through the natural process
is an activity of
(1) Primary Sector
(2) Secondary Sector
(3) Tertiary Sector
(4) Technology Sector
102. (1) The primary sector of the economy is the sector of
an economy making direct use of natural resources.
This includes agriculture, forestry, fishing, mining,
and extraction of oil and gas.

(SSC (10+2) Level Data Entry
Operator & LDC Exam.
10.11.2013, Ist Sitting)
103. Which one of the following is not
a method for computing GNP ?
(1) Income Approach
(2) Expenditure Approach
(3) Savings Approach
(4) Value Added Approach
103. (1) Gross National Product (GNP) can be defined as
an economic statistic which includes Gross Domestic
Product, plus any income earned by the residents
from investments made overseas. Net factor income
from abroad = income earned in foreign countries by
the residents of a country – income earned by nonresidents in that country.

(SSC (10+2) Level Data Entry
Operator & LDC
Exam. 10.11.2013, Ist Sitting)
104. An economy which does nothave
any relation with the rest of the
world is known as
(1) Socialist economy
(2) Closed economy
(3) Open economy
(4) Mixed economy
104. (2) A Closed economy is an economy in which no activity is conducted with outside economies. A closed
economy is self-sufficient, meaning that no imports
are brought in and no exports are sent out. The goal
is to provide consumers with everything that they
need from within the economy's borders.

(SSC Multi-Tasking (Non-Tech.) Staff
Exam. 23.02.2014, IInd Sitting)
105. Preparation of butter, ghee by a
household for their own use is a
part of :
(1) own-account production
(2) household capital formation
(3) industrial production
(4) consumption
105. (4) The processing of agricultural products; the production of grain by threshing; the production of flour
by milling; the curing of skins and the production of
leather; the production and preservation of meat and
fish products; the preservation of fruit by drying,
bottling, etc.; the production of dairy products such
as butter or cheese; the production of beer, wine or
spirits; the production of baskets and mats; etc, come
under processing of primary commodities for own

Re-Exam–2013, 27.04.2014)
106. Average propensity to consume
is defined as
(1) Aggregate consumption ¸ Total population
(2) Aggregate income ¸ Aggregate
(3) Change in consumption ¸
Change in income
(4) Aggregate consumption ¸ Aggregate income
106. (4) In economics, the average propensity to consume
(APC) is defined as the ratio of aggregate or total consumption to aggregate income in a given period of
time. Thus, the value of average propensity to consume, for any income level, may be found by dividing consumption by income.

(SSC GL Tier-I Exam.
19.10.2014, Ist Sitting)
107. Which of the following relations
always holds true ?
(1) Income = Consumption + Investment
(2) Income = Consumption + Saving
(3) Saving = Investment
(4) Income = Consumption + Saving + Investment
107. (2) Consumers do one of two things with their disposable income: They save it or they spend it. So
Income = Consumption + Saving.

(SSC GL Tier-I Exam.
19.10.2014, Ist Sitting)
108. The Keynesian consumption
function shows a relation between
(1) aggregate consumption and
total population.
(2) aggregate consumption and
general price level.
(3) aggregate consumption and
aggregate income
(4) aggregate consumption and
interest rate
108. (3) According to Keynesian Theory of consumption,
the current real disposable income is the most important determinant of consumption in the short
run. It bases consumption on current income.

(SSC GL Tier-I Exam.
19.10.2014, Ist Sitting)
109. Over short period, when income
rises, average propensity to consume usually
(1) rises
(2) falls
(3) remains constant
(4) fluctuates
109. (2) Keynes postulated that aggregate consumption is
a function of aggregate current disposable income.
The Keynesian consumption function is written as:
C = a + cY a > 0, 0 < c < 1; where a is the intercept, a constant which measures consumption at a
zero level of disposal income; c is the marginal propensity to consume (MPC); and Y is the disposal income. So as income increases, average propensity
to consume (APC = C/Y) falls.

(SSC GL Tier-I Exam.
19.10.2014, Ist Sitting)ECONOMICS
110. According to Keynes, business
cycles are due to variation in the
rate of investment caused by
fluctuations , in the
(1) Marginal efficiency of capital
(2) Marginal propensity to save
(3) Marginal propensity to consumption
(4) Marginal efficiency to investment
110. (1) According to Keynes’ ‘General Theory of Employment, Interest and Money,’ business cycles are caused
by variations in the rate of investment which are
caused by fluctuations in the marginal efficiency of
capital. Marginal efficiency of capital means the expected profits from new investments.

(SSC GL Tier-I Exam. 19.10.2014)
111. The main emphasis of Keynesian
economics is on
(1) Expenditure (2) Exchange
(3) Foreign trade (4) Taxation
111. (1) Keynesian Economics is an economic theory of
total spending in the economy and its effects on output and inflation. It emphasizes that government expenditures (or tax cuts) leads to increase in GDP which
is a multiple of the original expenditure.

(SSC GL Tier-I Exam. 19.10.2014)
112. The book which is at the centrepiece of the study of Macro
- Economics was written by
(1) Prof. Samuelson
(2) Prof. J.M. Keynes
(3) Prof. Benham
(4) Prof. Baumol
112. (2) J.M. Keynes’s magnum opus, ‘The General Theory of Employment, Interest and Money’ is often viewed
as the foundation of modern macroeconomics. Macroeconomics deals with the performance, structure,
behavior, and decision-making of an economy as a
whole, rather than individual markets.

(SSC GL Tier-I Exam. 26.10.2014)
113. The basic problem studied in
Macro - Economics is
(1) production of income
(2) usage of income
(3) flow of income
(4) distribution of income
113. (1) Macroeconomics involves the sum total of economic
activity, dealing with the issues such as production
of national income, growth, inflation, and unemployment. It is all about is about maximizing national income and growth.

(SSC GL Tier-I Exam. 26.10.2014)
114. Capacity utilisation
(1) is usually near 100 percent.
(2) represents the percent of the
labour force that is employed.
(3) is a measure of the proportional of the existing capital
stock used for current production.
(4) rises as the economy moves
into a recession, since firms
must replace unemployed
workers with some other resources to maintain production.
114. (3) Capacity utilisation refers to the extent or level to
which the productive capacity of a plant, firm, or country is used in generation of goods and services. Expressed usually as a percentage, it is computed by
dividing the total capacity with the portion being utilized.

(SSC CHSL (10+2) DEO & LDC
Exam. 02.11.2014, IInd Sitting)
115. The value of investment multiplier relates to
(1) change in income due to
change in autonomous investment.
(2) change in autonomous investment due to change in income.
(3) change in income due to
change in consumption.
(4) change in the income due to
change in induced investment.
115. (2) The term investment multiplier refers to the concept that any increase in public or private investment
spending has a more than proportionate positive impact on aggregate income and the general economy.
The investment multiplier tries to determine the financial impact for a public or private project.

(SSC CHSL (10+2) DEO & LDC
Exam. 02.11.2014, IInd Sitting)
116. Savings rate is relatively low in
developed economies because of
(1) Low per capita income
(2) Welfare programmes
(3) Liquidity/Borrowing constraint
(4) High interest rate
116. (2) As a general rule, saving is considered as a derivative of consumption. Developed economies have lower
saving rates than developing countries because at the
same income level, the level of consumption is higher
in their cases. Besides, as seen in the recent case of
the United States, welfare programmes have been found
to be responsible for falling saving rate. Redistributing
from young and future generations to older generations raises national consumption and lowers national
saving (The Concise Encyclopedia of Economics).

(SSC CHSL (10+2) DEO & LDC
Exam. 16.11.2014,
Patna Region : Ist Sitting)
117. The relationship between the rate
of interest and level of consumption was first visualized by
(1) Amartya K. Sen
(2) Milton Friedman
(3) Irving Fisher
(4) James Duesenberry
117. (3) Irving Fisher, in His Theory of Interest (1930),
found the relationship between interest rates (nominal interest rate and real interest rate) and the consumption level. Though his theory is about interest
rate and inflation, it discusses the effect of real interest rate on savings and gives an inverse relationship
between nominal interest rates and consumer expenditures.

(SSC CHSL (10+2) DEO & LDC
Exam. 16.11.2014)
118. What is meant by ‘Capital Gain’ ?
(1) Part of profits added to the
(2) Appreciation in the money
value of assets
(3) Additions to the capital invested in a business
(4) None of these
118. (2) A capital gain is a profit that results from a disposition of a capital asset, such as stock, bond or real
estate, where the amount realised on the dispositionECONOMICS
exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price. Capital gains may refer to "investment
income" that arises in relation to real assets. In other
words, a capital gain represents an appreciation in
value accruing over a prescribed period of time on
the asset.

(SSC CHSL (10+2) DEO & LDC
Exam. 16.11.2014, Ist Sitting
TF No. 333 LO 2)
119. Collective consumption means
(1) household consumption
(2) individual consumption
(3) self–consumption
(4) consumption by the citizens
of the country
119. (4) Collective consumption is a concept that refers to
the many goods and services that are produced and
consumed on a collective level, such as in cities or
countries. These include schools, libraries, roads,
bridges, public transportation, health care, welfare,
fire and police protection, etc.

(SSC CHSL (10+2) DEO & LDC
Exam. 16.11.2014, IInd Sitting
TF No. 545 QP 6)
120. The market equilibrium for a commodity is determined by:
(1) The market supply of the
(2) The balancing of the forces
of demand and supply for the
(3) The intervention of the Government.
(4) The market demand of the
120. (2) Market Equilibrium is determined when the quantity demanded of a commodity becomes equal to the
quantity supplied. The price determined corresponding to market equilibrium is known as equilibrium
price and the corresponding quantity is known as
equilibrium quantity.

Police SI Exam, 21.06.2015
(Ist Sitting) TF No. 8037731)
121. Regarding money supply situation in India it can be said that
the :
(1) Currency with the public is
inconvertible only.
(2) Currency with the public is
less than the deposits with
the banks.
(3) Currency with the public is
more than the deposits with
the banks.
(4) Currency with the public is
almost equal to the deposits
with banks.
121. (2) Money supply in India includes the following: (i)
Currency with the public; (ii) Demand deposits and
time deposits with banks; (iii) Deposits with reserve
Bank of India; and (iv) Deposits in Post Office. The
currency with public is less than the total currency
issued by RBI. This is because of cash reserves with
banks, i.e., a part of currency issued remains with
banks. As far as deposits are concerned, during the
last four decades, the proportion of demand deposits, time deposits and other with banks in relation to
total supply of money has been increasing with reciprocal diminution in currency held by the public. This
is mainly due to the expansion of banking facilities in
the country. Almost all the money in the economy
exists as bank deposits – and banks create these
deposits simply by making loans.

Police SI Exam, 21.06.2015
(Ist Sitting) TF No. 8037731)
122. The equilibrium price of a commodity will definitely rise if there
is a/an :
(1) increase in supply combined
with a decrease in demand.
(2) increase in both demand and
(3) decrease in both demand and
(4) increase in demand accompanied by a decrease in supply.
122. (4) Price of a commodity is always determined by the
forces of demand and supply in the market. The price
at which the amount demanded and amount supplied
are equal is known as ‘equilibrium price.’ The equilibrium price definitely increases when there is an increase in demand combined with the decrease in

Police SI Exam, 21.06.2015
(Ist Sitting) TF No. 8037731)
123. If a change in all inputs leads to
a proportionate change in output, it is case of
(1) Constant returns to scale
(2) Diminishing returns to scale
(3) Increasing returns to scale
(4) Variable returns to scale
123. (1) If output increases by that same proportional change
as all inputs change then there are constant returns
to scale (CRS). If output increases by less than that
proportional change in inputs, there are decreasing
returns to scale (DRS). If output increases by more
than that proportional change in inputs, there are
increasing returns to scale (IRS).

Police SI Exam, 21.06.2015
IInd Sitting)
124. Which of the following is a consequence of inflationary price
rise ?
(1) Obstacle in development
(2) Increase in economic inequalities
(3) All of these
(4) Adverse effect on the balance of payment
124. (3) Inflationary price rise is harmful to a country’s
economic performance and to the welfare of its citizens. It can create a random redistribution of income
given that inflation does not have an equal impact on
individuals and groups. The balance of payments may
deteriorate because domestic inflation stimulates import spending, given that imports appear relatively
cheaper, and dampens export sales. A continuous
price rise can be an obstacle to development as it has
an adverse effect on saving and investment and causes a fall in growth.

Police SI Exam, 21.06.2015
125. Equilibrium price in the market
is determined by the
(1) equality between marginal
cost and average cost.
(2) equality between total cost
and total revenue.
(3) equality between average cost
and average revenue.
(4) equality between marginal
cost and marginal revenue.
125. (4) The equilibrium price is the market price where
the quantity of goods supplied is equal to the quantity of goods demanded. This is the point at which the
demand and supply curves in the market intersect.
Both under perfect competition and monopolistic
competition, the firm is in equilibrium at the point of
equality of marginal cost and marginal revenue. (MC
= MR).

(SSC CGL Tier-I Exam, 09.08.2015
(Ist Sitting) TF No. 1443088)
126. Internal economies
(1) arise when there is expansion
in an industry.
(2) arise in an economy as it
makes progress.
(3) accrue to a firm when it expands its output.
(4) arise when there is expansion
in internal trade.
126. (1) Internal economies are those economies in production—those reductions in production costs—which
accrue to the firm itself when it expands its output
or enlarges its scale of production. The internal economies arise within a firm as a result of its own expansion independent of the size and expansion of
the industry as a whole.

(SSC CGL Tier-I Exam, 09.08.2015
(Ist Sitting) TF No. 1443088)
127. One of the features of a free
market economy is
(1) active state intervention
(2) public ownership of factors
of production
(3) rationing and price control
(4) consumer’s sovereignty
127. (4) Consumer Sovereignty is one of the features of a
free market economy. It refers to the assertion consumer preferences determine the production of goods
and services. In a free market system, market performance is in fact responsive to the specific wants
of the consumers within the system.ECONOMICS

(SSC CGL Tier-I Exam, 09.08.2015
(Ist Sitting) TF No. 1443088)
128. Which of the following costs is
related to marginal cost?
(1) Variable Cost (2) Implicit Cost
(3) Prime Cost (4) Fixed Cost
128. (1) In economics, marginal cost is the change in the
total cost that arises when the quantity produced is
incremented by one unit. That is, it is the cost of
producing one more unit of a good. Marginal cost is
independent of the fixed cost and depends on the
changes in the variable factors. Since fixed costs do
not change with output, there are no marginal fixed
costs when output is increased in the short run. It is
only the variable costs that vary with output in the
short run. Therefore, the marginal costs are in fact
due to the changes in variable costs, and whatever
the amount of fixed cost, the marginal cost in unaffected by it.

(SSC CGL Tier-I Exam, 09.08.2015
(IInd Sitting) TF No. 4239378)
129. Surplus budget is recommended during :
(1) Boom (2) Depression
(3) Famines (4) War
129. (2) Surplus budget is a budget in which government
receipts are greater than government expenditures.
Such a budget is desired when the economy is battling inflation due to excess aggregate demand (AD).
Surplus budget plugs the inflationary gap by lowering the level of aggregate demand. AD is lowered on
account of (i) rise in revenue collection by the government, and (ii) fall in government expenditure.

(SSC CGL Tier-I Exam, 16.08.2015
(Ist Sitting) TF No. 3196279)
130. Economic profit or normal profit
is the same as :
(1) optimum profit
(2) accounting profile
(3) maximum profit
(4) net profit
130. (4) Normal profit or economic profit is an economic
condition occurring when the difference between a
firm’s total revenue and total cost is equal to zero.
Simply put, normal profit is the minimum level of profit
needed for a company to remain competitive in the
market. In a sense, normal profit is the same as
net profit which is calculated by subtracting a company’s total expenses from total revenue, thus showing what the company has earned (or lost) in a given
period of time. Accounting profit occurs when revenues are greater than costs, and not equal, as in the
case of normal profit.

(SSC CGL Tier-I Exam, 16.08.2015
(Ist Sitting) TF No. 3196279)
131. When income increase, consumption also increases :
(1) in a lower proportion
(2) in a higher proportion
(3) in the same proportion
(4) None of the options
131. (1) According to the Keynesian Consumption theory,
“men are disposed, as a rule and on average, to increase their consumption as their income increases,
but not by as much as the increase in their income.”
Another feature of consumer behavior is that when
income increases, people do not spend their entire
incremental income on consumption. They save a part
of it for their financial security during the period of
unemployment, illness, etc. In simple words, the marginal propensity to consume decreases, i.e., households spend a decreasing proportion of marginal income on consumption. That is why families on lower
income scale save a lower percentage of their income
and those on higher scale of income save a larger
proportion of their income.

(SSC CGL Tier-I Exam, 16.08.2015
(IInd Sitting) TF No. 2176783)
132. The total utility from 9 units of
commodity x is 20 and from 10
units is 15. Calculate the marginal utility from 10th unit.
(1) 0.5 (2) –0.5
(3) 5 (4) –5
132. (4) Marginal Utility = Change in Total Utility / Change
in number of Units consumed. The first component
of the formula is to calculate the change in total utility. The second component of the marginal utility formula is the change in the number of units that have
been consumed. This is done by subtracting the number that is currently being consumed from a previously consumed amount.
So Marginal Utility (MU) from 10th Unit = TU10 - TU9=
15 – 20= –5

Exam, 01.11.2015, IInd Sitting)
133. Barter transactions means
(1) Goods are exchanged with
(2) Coins are exchanged for
(3) Money acts as a medium of
(4) Goods are exchanged with
133. (4) Barter is a system of exchange where goods or
services are directly exchanged for other goods or
services without using a medium of exchange, such
as money. Barter, as a replacement for money as the
method of exchange, is used in times of monetary
crisis, such as when the currency may be either unstable or simply unavailable for conducting commerce.

Exam, 01.11.2015, IInd Sitting)
134. The supply-side measure to control inflation is
(1) Reducing public expenditure
(2) Price control through Public
Distribution System
(3) Higher taxation to mop up liquidity
(4) Credit control
134. (2) The issue of inflation is addressed from both demand and supply sides. demand management is
achieved by measures such as postponing public expenditure, mopping up excess liquidity either through
taxes or savings schemes, etc. On the supply side,
the mechanism of Public Distribution System (PDS)
ensures availability of essential commodities for the
vulnerable sections of society. This helps to maintain
price levels. Coupled with this is the open market
sale of rice and wheat resorted to by FCI from its
buffer stock in times of price rise.

(SSC (10+2) Stenographer Grade
‘C’ & ‘D’ Exam. 31.07.2016)
135. The Ability Principle of Taxation
is given by
(1) Adam Smith
(2) Edgeworth
(3) Joan Robinson
(4) J.S.Mill
135. (1) The ‘Ability-to-Pay’ principle of Taxation is one of
the canons of taxation proposed by Adam Smith in
his ‘Wealth of Nations.’It is a progressive taxation
principle that maintains that taxes should be levied
according a taxpayer's ability to pay. It is concerned
with the equitable distribution of taxes according to
the stated taxable capacity or ability to pay of an
individual or group. The emphasis in this approach
is put on redistribution of income.

(SSC (10+2) Stenographer Grade
‘C’ & ‘D’ Exam. 31.07.2016)
136. ‘Galloping Inflation’ is also known
(1) Walking Inflation
(2) Running Inflation
(3) Hyper Inflation
(4) Creeping Inflation
136. (3) When prices rise between 20% to 100% per annum or even more, it is called galloping or hyperinflation. Such a situation brings a total collapse of the
monetary system because of the continuous fall in
the purchasing power of money. Galloping inflation
has adverse effect on middle and low income groups
in the society.

(SSC (10+2) Stenographer Grade
‘C’ & ‘D’ Exam. 31.07.2016)
137. Average Fixed Cost Curve is
(1) Upward sloping
(2) ‘U’ shaped
(3) ‘V’ shaped
(4) Downward sloping
137. (4) The Average Fixed Cost Curvegraphically represents the relation between average fixed cost incurred
by a firm in the short-run product of a good or service and the quantity produced. it is relatively high at
small quantities of output, then declines as production increases. It is downward sloping because as
output increases, the firm spreads its fixed costs
over larger and larger amounts of output.

(SSC (10+2) Stenographer Grade
‘C’ & ‘D’ Exam. 31.07.2016)
138. In which of the following market
forms, a firm does not exercise
control over price?
(1) Monopoly
(2) Perfect competition
(3) Oligopoly
(4) Monopolistic competition
138. (2) In perfect competition, the existence of a large
number of firms producing and selling the product
ensures that an individual firm exercises no influence
over the price of the product. The output of an individual firm constitutes a very small fraction of the
total output of the whole industry so that any increase
or decrease in output by an individual firm has a negligible effect on the total supply of product of the industry. As a result, a single firm is not in a position to
influence the price of the product by the increasing or
reducing its output.

Exam. 10.09.2016)
139. Situation Analysis is useful for:
(1) Analysis of Capital Market
(2) SWOT Analysis
(3) Capital Market
(4) Analysis of Capital Market
and Capital Market
139. (2) Three of the four options in the question are identical. Situation analysis refers to a collection of methods that managers use to analyze an organization’s
internal and external environment to understand the
organization’s capabilities, customers, and business
environment. It is useful for Strengths, Weaknesses,
Opportunities, and Threats (SWOT) analysis in which
internal strengths and weaknesses of an organization,
and external opportunities and threats faced by it are
closely examined to chart a strategy.

(SSC SPO SI, ASI Online Exam.
05.06.2016, (2nd Sitting))
140. Which term is used in economics for the market value of all
goods and services in one year
by labour and properly supplied
by the residents of the country?
(1) GDP (2) GPN
(3) OMP (4) GNP
140. (4) Gross National Product (GNP) is defined as “the
market value of all goods and services produced in
one year by labour and property supplied by the residents of a country.” It is contrasted to Gross domestic product (GDP), defined as “the value of all final
goods and services produced in a country in 1 year.”ECONOMICS

(SSC CPO SI, ASI Online Exam.
05.06.2016, (2nd Sitting))
141. Market segmentation is:
(1) Group of Sales Persons
(2) Dividing target groups as per
their needs
(3) Market Division
(4) Market Space
141. (2) Market segmentation is a marketing strategy which
refers to the aggregating of prospective buyers into
groups, or segments, having similar needs, wants, or
demand characteristics. Its objective is to design a
marketing mix that precisely matches the expectations
of customers in the targeted segment.

(SSC CPO SI, ASI Online Exam.
05.06.2016, (2nd Sitting))
142. What will be the effect on inferior commodities when income of
the consumer rises?
(1) Negative effect
(2) Positive effect
(3) No effect
(4) First increase then decrease
142. (1) In economics, an inferior good is a good that decreases in demand when consumer income rises (or
rises in demand when consumer income decreases),
unlike normal goods, for which the opposite is observed. Normal goods are those for which consumers’
demand increases when their income increases.
Cheaper cars are examples of the inferior goods.

(SSC CPO SI, ASI Online Exam.
05.06.2016, (2nd Sitting))
143. Which of the following curve describes the variation of household expenditure on a particular
good with respect to household
income ?
(1) Demand curve
(2) Engel curve
(3) Great Gatsby curve
(4) Cost curve
143. (2) In microeconomics, an Engel curve describes how
household expenditure on a particular good or service
varies with household income. The curve is named
after the German statistician Ernst Engel (1821–1896),
who was the first to investigate this relationship between goods expenditure and income systematically
in 1857.

(SSC CPO Exam.
06.06.2016, (2nd Sitting))
144. Malthusian theory is associated
with which of the following ?
(1) Poverty (2) Employment
(3) Diseases (4) Population
144. (4) The most well-known theory of population is the
Malthusian theory.It explains the relationship between
the growth in food supply and in population. It states
that population increases faster than food supply and
if unchecked leads to vice or misery. Thomas Robert
Malthus enunciated his views about population in his
famous book, Essay on the Principle of Population as
it affects the Future Improvement of Society, published in 1798.

(SSC CHSL (10+2) Tier-I (CBE)
Exam. 08.09.2016 (Ist Sitting))ECONOMICS
145. When average product of an input is at its maximum then :
(AP= Average product)
(MP= Marginal product)
(1) AP = 0 (2) AP = MP
(3) AP > MP (4) AP < MP
145. (2) There is a close relationship between marginal product and average product because both are derived
from total product. When marginal product is equal to
average product, the average product is at its maximum. In the short-run production function, since marginal product starts off as greater than average product and then falls below average product, we can assume that at the “cross-over point,” when MP = AP,
AP is at its maximum.

Delhi Police SI Exam. 20.03.2016
(2nd Sitting))
146. If total product is at its maximum then:
(AP= Average product)
(MP= Marginal product)
(1) AP = 0 (2) AP < 0
(3) MP = 0 (4) AP = MP = 0
146. (3) Total product (TP) is the total output a production
unit can produce, using different combination of factors of production. When marginal product =0 (at point
D in the figure), the total product is at its maximum
(as seen at point C in the figure given below). Then en
as the marginal product becomes negative, the total
product starts going down.

Delhi Police SI Exam. 20.03.2016
(2nd Sitting))
147. Equilibrium output is determined by:
(1) the equality between total
Variable cost and Marginal
(2) the equality betweem Marginal cost and Marginal revenue.
(3) the equality between Average cost and Average revenue.
(4) the equality between total
cost and total revenue.
147. (2) Equilibrium Output refers to the level of output
where the Aggregate Demand is equal to the Aggregate Supply (AD = AS) in an economy. It signifies that
whatever the producers intend to produce during the
year is exactly equal to what the buyers intend to buy
during the year. According to MR-MC approach, equilibrium refers to stage of that output level at which
Marginal Cost (MC) = Marginal Revenue (MR). As long
as MC is less than MR, it is profitable for the producer to go on producing more because it adds to its
profits. He stops producing more only when MC becomes equal to MR.

Delhi Police SI Exam. 20.03.2016
(2nd Sitting))
148. An employer goes on employing
more and more of a factor units
until :
(1) the Average Revenue Productivity becomes equal to Marginal Revenue Productivity.
(2) the Marginal Revenue Productivity becomes zero.
(3) the Diminishing Marginal Returns sets into operation.
(4) the Marginal Revenue Productivity of a factor becomes
equal to its reward.
148. (4) According to the Marginal Productivity Theory, the
reward or the price of a factor unit depends upon its
productivity or its contribution to the total product.
While employing a factor, an employer compares the
marginal revenue productivity (MRP) of the lost unit
and the marginal cost of the factor. He will employ a
factor up to the point where the reward (marginal cost
of the factor) paid to the factor equals its MRP. If MRP
is more than the marginal cost, the employer increases its profits by employing more units of the factor;
on the other hand, if marginal cost of the factor is
greater than MRP, it will reduce employment to reduce its loss.

Delhi Police SI Exam. 20.03.2016
(2nd Sitting))
149. Apart from the availability of raw
material location of an industry
is also dependent on the availability of:
(1) enviornmental protection and
(2) man power and energy
(3) transport and bio energy
(4) water and inputs
149. (2) Some of the factors which affect the industrial location are as follows: availability of raw materials, availability of labour, availability of capital, availability of
power, availability of market and infrastructure. good
supply of labor is one of the traditional factors that is
indispensable for industry. Besides, availability of power/electricity is also a deciding factor.

Delhi Police SI Exam. 20.03.2016
(2nd Sitting))
150. What happens when there is a
demand deficiency in an economy?
(1) Poverty (2) Stagnation
(3) Recession (4) Inflation
150. (2) Deficient demand refers to the situation when
aggregate demand for goods and services falls short
of aggregate supply of output which is produced by
fully employing the given resources of the economy.
This deficient demand leads to the decrease in output,
employ-ment and prices in the econo-my. According
to Malthus, deficiency of demand could lead to
stagnation in which both capital and labor are
redundant relative to the opportunities for employing
them profitably.

Post a Comment