1) Which of the following statements about inferior goods is/are false?

I. Inferior goods are those that we will never buy, no matter how cheap they are.
II. Inferior goods are those that we buy more of, if we become poorer.
III. Inferior goods are those that we buy more of, if we become richer.
a. I and III only
b. I only
c. III only.
d. I, II, and III

2) Suppose the income elasticity of education in private school in India is 3.6. What does this indicate
a. Private school education is highly wanted by rich
b. Private school education is a necessity
c. Private school education is a luxury
d. We should have more private schools.

3) If the organizers of an upcoming cricket match decide to increase the ticket price in order to raise
its revenues, what they have learned from past experience is;
a. The percentage increase in ticket rates will be always equal the percentage decrease in
tickets sold
b. The percentage increase in ticket rates will be always greater than the percentage
decrease in tickets sold
c. The percentage increase in ticket rates will be less than the percentage decrease in tickets
sold
d. (a) and (c) above are true

4) The following diagram shows the relationship between price of Good X and quantity demanded of
Good Y. What we infer from the diagram is;

a. Good X and Good Y are perfect complements

b. Good X and Good Y are perfect substitutes
c. Good X and Good Y are remote substitutes
d. Good X and Good Y are close substitutes
5) The diagram given below shows

a. A change in demand which may be caused by a rise in income and the good is a normal
good
b. A shift of demand curve caused by a fall in the price of a complementary good
c. A change in demand which is caused by a rise in income and the good is an inferior
good
d. A shift of demand curve caused by a rise in the price of a substitute and the good is a
normal good

6) The average income of residents of two cities A and B and the corresponding change in demand
for two goods is given in the following table. Which of the following statements is true?

a. Both goods are normal goods in both cities A and B

b. Good X is a normal good in both cities; good Y is an inferior good in city A
c. Good X is a normal good in both cities; good Y is an inferior good in city B
d. Need more information to make an accurate comment

7) If the price of a commodity raised by 12% and Ed is (-) 0.63, the expenditure made on the
commodity by a consumer will
a. Decrease
b. Increase
c. Remain same
d. Can’t say
8) If consumers always spend 15 percent of their income on food, then the income elasticity of
demand for food is .
a. 1.50
b. 1.15
c. 1
d. 0.15

9) The elasticity of substitution between two perfect substitutes is:

a. Zero
b. greater than zero
c. less than infinity
d. infinite

10)If a point on a demand curve of any commodity lies on X Axis, then price elasticity of demand of
that commodity at that point will be
a. Infinite
b. More than zero
c. Less than zero
d. Zero

11)For Giffen goods, the Engel curve is:

a. Positive sloped
b. Vertical
c. Horizontal
d. Negative sloped

12)When the demand curve is a rectangular hyperbola an increase in the price of the commodity
causes the total expenditure of consumers of the commodity to:
a. Remain unchanged
b. Increase
c. Decrease
d. Any of the above

13)A movement along a curve rather than a shift in the curve can be measured by:
a. Cross elasticity of demand
b. Income elasticity of demand
c. Price elasticity of demand & Price elasticity of Supply
d. None of these

14)The Substitution effect will be stronger when-

a. The goods are closer substitutes
b. There is lower cost of switching to the substitute good
c. There is lower inconvenience while switching to the substitute good.
d. All of these
15)When the demand falls in response to the growth of purchases by other buyers, such an effect
a. Bandwagon
b. Snob
c. Veblen
d. Demonstration
16)The demand function is given as Q= 100 - 10P. Find the elasticity using point method when price is
Rs. 5
a. 2
b. -2
c. 1
d. -1

17)A consumer buys 80 units of a commodity at Rs. 4 per unit. When the price falls, he buys 100 units.
If Ed = -1, the new price will be:
a. Rs. 3.5
b. Rs. 3
c. Rs. 2.5
d. Rs. 2

18)Price elasticity of Demand for addictive products like Cigarettes and alcohol would be
a. Greater than 1
b. Less than 1
c. Infinity
d. One

19)Ceteris paribus, what would be the impact on foreign exchange earnings for a given falling export
prices, if the demand for the country's exports is inelastic?
a. Foreign Exchange Earnings decrease
b. Foreign Exchange Earnings increase
c. No effect on Foreign Exchange earnings
d. None of the above

20)What is the elasticity between midpoint & upper extreme point of a straight line demand curve?
a. Infinite
b. Zero
c. >1
d. <1

21)The successive units of stamps collected by a little boy give him greater and greater satisfaction.
This is a clear case of
a. Operation of the law of demand.
b. Consumer surplus enjoyed in hobbies and rare collections
c. Exception to the law of diminishing utility.
d. None of the above
22)A point below the budget line of a consumer
 a. Represents a combination of goods which costs the whole of consumer’s income
b. Represents a combination of goods which costs less than the consumer’s income
c. Represents a combination of goods which is unattainable to the consumer given his/her
money income
d. Represents a combination of goods which costs more than the consumers’ income
23)Comforts lie between
a. inferior goods and necessaries
b. luxuries and inferior goods
c. necessaries and luxuries
d. none of the above
24)When the total income of a consumer is Rs. 750, find out the prices of pancake & muffins
respectively if:

a. 15, 30
b. 30, 15
c. 50, 25
d. 25, 50

25)While drawing budget line of a consumer consuming Nachos chips and Pepsi, if the quantity of
Nachos taken on Y-axis and quantity of Pepsi on X-axis. The slope of budget line will be:
a. Pp/ Pn
b. Pn/Pp
c. M/Pn
d. M/Pp
Where, Pp – Price of Pepsi, Pn - Price of Nachos & M – Money income of consumer

26)Match the following

List – I List –II

A. Cardinal Approach 1. Marginal Utility
B. Ordinal Approach 2. Alfred Marshall
C. Hicks & Allen Approach 3. J.R. Hicks
D. Consumers’ surplus 4. Indifference curve

Codes A B C D
a. 1 2 3 3
b. 1 3 2 4
c. 1 3 4 2
d. 1 4 2 3
27)Match the Following
List – I List –II
A. Two perfect substitute goods 1. Linear Indifference Curve
B. Two perfect complementary goods 2. Monotonic Preference
C. Indifference curve is always 3. L-Shape Indifference Curve
D. Higher IC gives higher level of 4. Convex to the origin
satisfaction

Codes A B C D
a. 1 2 3 3
b. 3 1 4 2
c. 1 3 4 2
d. 1 3 2 4

28)When MRSxy < Px/Py, in order to reach equilibrium, the consumption of

a. Good Y should increase
b. Good X should increase
c. Good X & Y should increase
d. None of the above
29)Following are the characteristics of wants, except:
a. Each want is satiable
b. All wants recur again & again
c. Wants are not independent; they are complementary
d. Wants are subjective & relative
30)The consumer’s objective of reaching highest Indifference curve and maximizing satisfaction is
restricted by-
a. Total utility curve
b. Marginal utility curve
c. Marginal rate of substitution
d. Price line
31)Which of the following statements is correct?
a. When the price falls the quantity demanded falls
b. Seasonal changes do not affect the supply of a commodity
c. Taxes and subsidies do not influence the supply of the commodity
d. With lower cost, it is profitable to supply more of the commodity.

32)If the demand is more than supply, then the pressure on price will be
a. Upward
b. Downward
c. Constant
d. None of the above

33)The supply curve for highly perishable commodities during very short period is generally ——
a. Elastic
b. Inelastic
c. Perfectly elastic
d. Perfectly inelastic
34)Data on production of vegetables for the past two years showed that, despite stable prices, there is
a substantial decline in output of cabbage leading to lower supply into the market. Which of the
following can possibly be the reason?
a. An increase in the price of cauliflower which is equally preferred by consumers
b. Announcement of a subsidy by government on vegetable production
c. More farmers producing cabbage and the increasing competition among them
d. A substantial decrease in the price of capsicum
35)Which of the following alternatives would be true if the event presented in the following diagram
occurs?

a. A fall in wage costs of the firm along with a fall in consumer incomes
b. A shortage of raw materials and consequent increase in raw material price
c. An increase in subsidy by the government and a reduction in taxes
d. Decrease in the market price of the commodity in question

36)If there is decrease in quantity supplied of a commodity, there will be-

a. Upward movement on same supply curve
b. Rightward shift in supply curve
c. Downward movement on same supply curve
d. Leftward shift in supply curve

37)Relationship between slope of supply curve and elasticity of supply can be defined as
a. Product of slope of supply curve and ratio of quantity supply to price
b. Elasticity of supply is equal to the slope of supply curve.
c. Product of reciprocal of supply curve and ratio of price to quantity supplied
d. Elasticity of supply is equal to reciprocal of slope of supply curve.

38)A new technique of production reduces the marginal cost of producing paper. How will this affect
the supply curve of writing material like notebook, register & notepad etc.?
a. Upward movement on same supply curve
b. Downward movement on same supply curve
c. Leftward shift in supply curve
d. Rightward shift in supply curve
39)Suppose we are drawing a supply curve of a farmer which of the following will not be held
constant?
a. Price of Inputs
b. Weather Conditions
c. Technology
d. The price of the Commodity under consideration
40)The supply function is given as Q = -50 + 15p. Find the elasticity using point method, when price is
Rs. 20.
a. 1.2
b. 0.83
c. 0.86
d. None of the above

41)When price of a good rises from Rs. 20 to Rs. 30 the producer supplies 20% more, the price
elasticity of supply is:
a. 0.5
b. 0.4
c. 1
d. None of the above

42) The supply curve shows:

a. The minimum quantity that supplier is willing to supply at each price
b. The minimum price which will induce suppliers to offer the various quantities for
sale
c. The maximum price which will induce suppliers to offer the various quantities for sale
d. Both a & c

43) The flatter the curve, supply elasticity is:

a. Less
b. More
c. zero
d. 1

44)Commodities which requires specialized resources for production may have:

a. Less elastic supply
b. More elastic supply
c. Unitary elastic supply
d. Infinite elasticity

45)The market demand curve is: Qd = 10-2p and the market supply curve is: Qs = -2 + 10p. The
market will be in equilibrium if:
a. P = 1 and Q = 12
b. P = 5 and Q = 8
c. P = 1 and Q = 8
d. None of the above
46)Identify the correct statement:
a. The average product is at its maximum when marginal product is equal to average
product.
b. The law of increasing returns to scale relates to the effect of changes in factor proportions.
c. Economies of scale arise only because of indivisibilities of factor proportions.
d. Internal economies of scale can accrue when industry expands beyond optimum.

47)Which of the following is not a characteristic of land?

a. Its supply for the economy is limited.
b. It is immobile.
c. Its usefulness depends on human efforts.
d. It is produced by our forefathers.

48)Which of the following statements is true?

a. Accumulation of capital depends solely on income of individuals.
b. Savings can be influenced by government policies.
c. External economies go with size and internal economies with location.
d. The supply curve of labour is an upward slopping curve.

49)Diminishing marginal returns implies:

a. decreasing average variable costs.
b. decreasing marginal costs
c. increasing marginal costs
d. decreasing average fixed costs.

50)The short run, as economists use the phrase, is characterized by

a. at least one fixed factor of production and firms neither leaving nor entering the
industry.
b. generally, a period which is shorter than one year.
c. all factors of production are fixed and no variable inputs.
d. all inputs are variable and production is done in less than one year.
51)If decreasing returns to scale are present, then if all inputs are increased by 10% then:
a. output will also decrease by 10%
b. output will increase by 10%.
c. output will increase by less than 10%
d. output will increase by more than 10%

52)The “law of diminishing returns” applies to:

a. the short run, but not the long

run.
b. the long run, but not the short run.
c. both the short run and the long run.
d. neither the short run nor the long run.

Given the following data, answer the following questions:

 L TP MP

1 200 200

2 380 180

3 160

4 680

5 120

(Note: Missing values need to be computed.)

53)What is the marginal production of the 4th unit?
a. 170
b. 140
c. 120
d. 160

54)The production process described below exhibits.

Number of Workers Output
0 0
1 23
2 40
3 50
a. constant marginal product of labour.
b. diminishing marginal product of labour
c. increasing return to scale
d. increasing marginal product of labour.

55)In the short run, the firm's product curves show that
a. Total product begins to decrease when average product begins to decrease but continues to
increase at a decreasing rate.
b. When marginal product is equal to average product, average product is decreasing but at
its highest.
c. When the marginal product curve cuts the average product curve from below, the average
product is equal to marginal product.
d. In stage two, total product increases at a diminishing rate and reaches maximum at
the end of this stage.
56)Diminishing marginal returns for the first four units of a variable input is exhibited by the total
product sequence
a. 50, 50, 50, 50
b. 50, 110, 180, 260
c. 50, 100, 150, 200
d. 50, 90, 120, 140
 57)Use the following diagram to answer the question given below it

The marginal physical product of the third unit of labour is , the MP of the labour is
Negative
a. Six; fourth
b. Six; third
c. Six; fifth
d. Six; sixth

58)Which of the following statements describes increasing returns to scale?

a. Doubling of all inputs used leads to doubling of the output.
b. Increasing the inputs by 50% leads to a 25% increase in output.
c. Increasing inputs by 1/4 leads to an increase in output of 1/3
d. None of the above

59)Assertion (A): In the short run, a producer operates in only II stage of Law of Diminishing Returns
where average product of variable factor is declining
Reason (R): In stage I and stage III the marginal product of the fixed and the variable factors
respectively are negative.
a. (A) is true and (R) is false
b. Both (A) and (R) are true & (R) is the correct explanation of (A)
c. Both (A) and (R) are true & (R) is not the correct explanation of (A)
d. (A) is false and (R) is true

60)In second stage of the Law of Variable Proportion-

a. MP diminishes & AP increases
b. AP diminishes but MP increases
c. Both MP& AP diminish
d. Both MP& AP increase
61)

Iso-Quants shown in the above figure exhibits:

1. Perfect substitutability of factors
2. Perfect complementarily of factors
3. Fixed proportion production function
4. Variable proportion production function

a. 1 & 2 only
b. 1 & 3 only
c. 3 & 4 only
d. 2 & 3 only

62)Match List I with List II and choose the correct answer using the codes given below.
List – I List –II
A. MP is larger than AP 1. AP is at its maximum
B. MP is equal to AP 2. AP is falling
C. MP is smaller than AP 3. AP is rising

Codes A B C
a. 1 2 3
b. 3 1 2
c. 2 3 1
d. 3 2 1
63)Assertion (A): An Iso-cost line is a straight line.
Reason (R): The market rate of exchange between the two inputs is constant.
a. (A) is true and (R) is false
b. Both (A) and (R) are true & (R) is the correct explanation of (A)
c. Both (A) and (R) are true & (R) is not the correct explanation of (A)
d. (A) is false and (R) is true

64)The schedule given below representing the combinations of two

variable inputs (Labour &Capital) for two Isoquants of output 100 and
200 respectively

On the basis of above schedule, which of the following statement is true?

a. IQ1 & IQ2 are parallel to each other
b. IQ1 & IQ2 are non-parallel & intersecting to each other.
c. IQ1 & IQ2 are neither parallel nor intersecting each other.
d. Can’t say

65)If the total cost of manufacturing commodity ‘X’ is Rs. 1,50,000. Out of this
implicit cost is Rs.80,000 what will be explicit cost:
a. Rs. 95,000
b. Rs. 1,25,000
c. Rs. 80,000
d. Rs. 70,000

66)Which of the following statements is correct?

a. When the average cost is rising, the marginal cost must also be rising.
b. When the average cost is rising, the marginal cost must be falling.
c. When the average cost is rising, the marginal cost is above the
average cost
d. When the average cost is falling, the marginal cost must be rising.

67)Which of the following is an example of “explicit cost”?

a. The wages a proprietor could have made by working as an employee of a
large firm
b. The income that could have been earned in alternative uses by the
resources owned by thefirm
 c. The payment of wages by the firm.
d. The normal profit earned by a firm.

68)Marginal cost is defined as:

a. the change in total cost due to a one unit change in output.
b. total cost divided by output.
c. the change in output due to a one unit change in an input
d. total product divided by
the quantity of input.Use the following
data to answer questions 9-11.
Output 0 1 2 3 4 5 6
Total Cost 240 330 410 480 540 610 690

69)Which of the following statements is true of the relationship among the average
cost functions?
a. ATC = AFC – AVC
b. AVC = AFC + ATC.
c. AFC = ATC + AVC
d. AFC = ATC – AVC

70)Which of the following is not a determinant of the firm’s cost function?

a. The production function.
b. The price of labour.
c. Taxes
d. The price of the firm’s output
71)Which of the following statements concerning the long-run average cost curve is
false?
a. It represents the least-cost input combination for producing each level of
output.
b. It is derived from a series of short-run average cost curves.
c. The short-run cost curve at the minimum point of the long-run
average cost curverepresents the least–cost plant size for all
levels of output
d. As output increases, the amount of capital employed by the firm
increases along the curve.

72)The negatively-sloped (i.e. falling) part of the long-run average total cost
curve is due to which ofthe following?
a. Diseconomies of scale
b. Diminishing returns
 c. The difficulties encountered in coordinating the many activities of a
large firm.
d. The increase in productivity that results from specialization

73)In figure below, possible reason why the average variable cost curve
approaches the average totalcost curve as output rises is:

a. Fixed costs are falling while total costs are rising at rising output.
b. Total costs are rising and average costs are also rising.
c. Marginal costs are above average variable costs as output rises.
d. Average fixed costs are falling as output rises.
74)Which of the following statements is incorrect?
a. The LAC curve is also called the planning curve of a firm.
b. Total revenue = price per unit × number of units sold.
c. Opportunity cost is also called alternative cost.
d. If total revenue is divided by the number of units sold, we get
marginal revenue.

75)Cost incurred which has ‘no relevance’ to future planning is called_

a. Marginal Cost
b. Sunk Cost
c. Book Cost
d. Average Cost

76)Which one of the following cost curve is rectangular hyperbola in shape?

a. TFC
b. MC
c. AFC
d. AVC
77)Which of the following is incorrect formula?
a. TC = AC × Q
b. ∑ MC = TC
c. ∑ MC = TVC
d. ∑ MC + TFC = TC

78)A firm encounters its “shutdown point” when:

a. average total cost equals price at the profit-maximizing level of output
b. average variable cost equals price at the profit-maximizing level of
output
c. average fixed cost equals price at the profit-maximizing level of output
d. marginal cost equals price at the profit-maximizing level of output
79)What will be the implicit cost of the firm?
a. Rs. 3,00,000
b. Rs. 2,50,000
c. Rs. 7,50,000
d. Insufficient data

80)The above mentioned firm is earning:

a. Accounting profit of Rs. 2,50,000.
b. Economic loss of Rs. 50,000
c. Both a. and b. are correct.
d. None of the above is correct

81)Beyond certain output level, when there is a sharp increase in Average

Variable Cost (AVC),Average Cost (AC) also increases due to the reason
that:
a. Fall in AFC is less than the sharp rise in AVC
b. Fall in AFC is greater than the sharp rise in AVC
c. Fall in AFC is equal to the rise in AVC
d. None of the above

82)Average Variable Cost Curve has a positive slope:

a. Up to normal capacity output
b. Beyond normal capacity output
c. At all levels of output
d. None of the above

83)Which of the following is an example of sunk cost?

a. Expenses incurred on advertising
b. Buy a new production facility
c. Replace worn out machinery
d. All of the above
84)Empirical evidence shows that the modern firms face LAC
a. U- shaped
b. Boat shaped
c. L- shaped
a. Linear

85) - arises due to endogenous factors?

a. External economies
b. Internal economies
c. Both a. and b.
d. None of the above

86)The four phases of the business cycle are

a. expansion, peak, contraction and trough
b. contraction, expansion, trough and boom
c. expansion contraction, peak, and trough
d. peak, depression, bust, and boom

87)When aggregate economic activity is declining, the economy is said to be in

a. Contraction
b. an expansion
c. a trough
d. a turning point

88)Peaks and troughs of the business cycle are known collectively as

a. Volatility
b. Turning points.
c. Equilibrium points.
d. Real business cycle events

89)The most probable outcome of an increase in the money supply is

a. interest rates to rise, investment spending to rise, and aggregate demand
to rise
b. interest rates to rise, investment spending to fall, and aggregate demand
to fall
c. interest rates to fall, investment spending to rise, and aggregate
demand to rise
d. interest rates to fall, investment spending to fall, and aggregate demand
to fall
90)Which of the following is not a characteristic of business cycles?
a. Business cycles have serious consequences on the well-being of the
society.
b. Business cycles occur periodically, although they do not exhibit the same
regularity.
c. Business cycles have uniform characteristics and causes
d. Business cycles are contagious and unpredictable.
91)Economic recession shares all of these characteristics except
a. Fall in the levels of investment, employment
b. Incomes of wage and interest earners gradually decline resulting in
decreased demand forgoods and services
c. Investor confidence is adversely affected and new investments may not
be forthcoming
d. Increase in the price of inputs due to increased demand for inputs

92)Business cycle generally originate in free market economies, what is a free

market economy?
a. The economy where government is in possession of major assets
b. The economy where private firms control major assets
c. The economy where decisions of productions are taken by public sector
undertakings
d. The economy where price is controlled by government

93)Suppose in an economy the population growth rate remained 6% during

last 5 years while theeconomic growth rate during the same period was
just 3%.
What will be the consequences of it? Select the right option from the options
given below.
a. Lesser savings→ Lower investment→ Low income &
employment→ Low effectivedemand → Overall slowdown in
economic activities
b. More consumption expenditure→ more demand→ more production→
more employment &income → Overall boom in economic activities
c. Increase in labour supply→ Lower wage rate→ Low income → Low
savings & investments
→ Low production→ Overall slowdown in economic activities
d. None of the above

94)Match List I with List II and choose the correct answer using the codes given
below.
List I List II
I Leading indicator A Industrial production
II Lagging indicator B. Changes in stock price
III. Coincident indicator C. Corporate profit

a. I-A, II-B, III-C

b. I-B, II-C, III-A
c. I-C, II-B, III-A
d. I-A, II-C, III-B
95)According to British Economist J. M. Keynes was the main cause
of massive decline inincome and employment during Great Depression of
1930.
a. Lower aggregate expenditure in the economy.
b. Banking crises and low money supply
c. Overdebtness
d. Lower profits & pessimism

96)Which of the following is not a variable in the index of leading indicators?

a. New consumer goods orders
b. Delayed deliveries
c. New building permits
d. Prime rate
97)Find the correct option:

a) a, b, c, d
b) b, c, a, d
c) a, b, d, c
d) b, a, d, c
98) Cost of living increases when business cycle is
a. at peak
b. contracting
c. expanding
d. at lowest point
99)Which of the following is not an example of coincident indicator?
a. Industrial production
b. Inflation
c. Retail sales
d. New orders for plant and equipment

100) When aggregate economic activity is declining, the economy is said to be in

a. Contraction
b. an expansion
c. a trough
d. a turning point