Economics MCQ Questions with Answer for all Competitive Exams

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Economics MCQ Questions with Answer

Q51. A firm is in equilibrium when its-

(a) Marginal cost equals the marginal revenue

(b) Total cost is minimum

(c) Total revenue is maximum

(d) Average revenue and marginal revenue are equal

Answer: (a)

Explanation: A firm’s equilibrium is a point when it has no inclination in changing its production or in short-run marginal revenue equals marginal cost.

Q52. Which one of the following pairs of goods is an example of Joint Supply?

(a) Coffee and Tea

(b) Ink and Pen

(c) Toothbrush and Paste

(d) Wool and Mutton

Answer: (d)

Explanation: Joint supply is the production of more than one product from a single resource. In the given example, wool and mutton are goods produced by single objects i.e. sheep.

Q53. An increase in the demand for goodwill causes the equilibrium price of the good to ________ and the equilibrium quantity to _________.

(a) Increase, increase

(b) Decrease, decrease

(c) Increase, decrease

(d) Decrease, increase

Answer: (a)

Explanation: Equilibrium is a situation where demand equals supply fixing quantity and Price. If there is an increase in demand, the demand curve will shift to the right and with supply meeting it, price and quantity both will increase respectively.

Q54. The demand for Labor is called–

(a) Derived demand

(b) Factory demand

(c) Market demand

(d) Direct demand

Answer: (a)

Explanation: Demand for Labor is derived demand because the demand for labor depends upon the demand for the products that workers will be producing.

 Q55. Who gave the ‘General Equilibrium Theory’?

(a) J. M. Keynes

(b) Leon Walras

(c) David Ricardo

(d) Adam Smith

Answer: (b)

Explanation: The most accepted theory of General Equilibrium was developed by French economist Leon Walras. This theory suggested that all prices and quantities are determined through the interaction of several markets with one another.

Q56. Payment of water charges by the farmers to the government represents

(a) Intermediate consumption

(b) Final consumption

(c) Fixed investment

(d) Inventory investment

Answer: (a)

Explanation: Intermediate consumption is the stage of consumption at which goods and services are utilized as inputs for further production.

Q57. The consumptions function refers to

(a) Relationship between income and employment

(b) Relationship between savings and investment

(c) Relationship between input and output

(d) Relationship between income and consumption

Answer: (d)

Explanation: Consumption function a formula developed by J.M. Keynes that shows the relationship between real disposable income and consumer spending. It lays very much stress on the importance of consumer spending in creating demand in the economy.

Q58. When marginal utility is zero, the total utility is-

(a) Minimum

(b) Increasing

(c) Maximum

(d) Decreasing

Answer: (c)

Explanation: Marginal utility measures extra utility derived from consuming an additional unit of product. Total utility is total satisfaction derived from consumption. These two utilities are related by the law of diminishing marginal utility i.e. as consumption increases, marginal utility diminishes, and at the stage when it is zero this means there will no further increase in total satisfaction. So, when MU is zero, TU is Maximum.

Q59. Plant and machinery are-

(a) Producer’s goods

(b) Consumer’s goods

(c) Distributor’s goods

(d) Free goods

Answer: (a)

Explanation: Plant and machinery are goods used for production. These can be termed as factors of production. So these will be considered as producer’s goods.

Q60. The third stage of the law of Variable proportion is called-

(a) Negative returns

(b) Positive returns

(c) Constant returns

(d) Increasing returns

Answer: (a)

Explanation: the law of variable proportion of three stages

  1. In the first stage average production increases with total product and MP
  2. The second stage is when the average product and marginal product start falling
  3. The third stage is when the marginal product is negative and the total product falls but the average product is still positive.

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