200+ Microeconomics 2 Solved MCQs

1.

Of ‘real wages’ and ‘money wages’

A. The former is a wider concept than the latter
B. The latter is a wider concept than the former
C. Both concept mean the same thing
D. All of the above
Answer» A. The former is a wider concept than the latter
2.

The concept of Quasi-rent mean

A. The rent to the workers
B. The rent shared by the Landlord and workers
C. The interest paid to the entrepreneur
D. The return to a factor of production which is fixed in supply in the short period
Answer» D. The return to a factor of production which is fixed in supply in the short period
3.

The return to a factor of production which is fixed in supply in the short period is called

A. Scarcity rent
B. Economic rent
C. Quasi-rent
D. Contractual rent
Answer» C. Quasi-rent
4.

The marginal productivity theory of distribution was firstly formulated in its complete form by

A. Adam Smith
B. J. S. Mill
C. J. B. Clark
D. David Ricardo
Answer» C. J. B. Clark
5.

The ‘iron law of wages’ is

A. The wage-fund theory
B. The marginal productivity theory of wages
C. Collective bargaining
D. The subsistence theory of wages
Answer» D. The subsistence theory of wages
6.

According to Prof Knight, profit is the reward for

A. Innovation
B. Capital
C. Foreseeable risks
D. Uncertainty bearing
Answer» D. Uncertainty bearing
7.

The uncertainty-bearing theory of profit was propounded by

A. F. H. Knight
B. F. B. Hawley
C. P. A. Samuelson
D. Joseph Schumpeter
Answer» A. F. H. Knight
8.

Which of the following is not included in the assumptions of Clark’s marginal productivity of distribution

A. Perfect competition
B. Constant population
C. Constant amount of capital
D. Labour is heterogeneous
Answer» D. Labour is heterogeneous
9.

Marginal productivity theory is also called

A. Real theory
B. Classical theory
C. Monetary theory
D. None of the above
Answer» A. Real theory
10.

Subsistence theory of wages was used by

A. Karl Marx
B. Robinson
C. J. S. Mill
D. David Ricardo
Answer» D. David Ricardo
11.

Profit is also known as

A. Contractual rent
B. Residual income
C. Net income
D. None of the above
Answer» B. Residual income
12.

Changes in the rate of interest affect the amount of money held for

A. transaction motive
B. precautionary motive
C. speculative motive
D. normal motive
Answer» C. speculative motive
13.

The marginal productivity theory of distribution is associated with

A. Adam Smith
B. Lionel Robbins
C. J. B. Clark
D. Bergson
Answer» C. J. B. Clark
14.

Who has contributed the modem theory of interest rate determination?

A. Paul A. Samuelson
B. Gunnar Myrdal
C. Knut Wicksell
D. J.R. Hicks
Answer» D. J.R. Hicks
15.

Whose name is associated with the “Uncertainty-bearing theory of profit”?

A. J. Schumpeter
B. F.H. Knight
C. J.B. Clark
D. F.W. Watker
Answer» B. F.H. Knight
16.

Who has sought to measure Consumer’s Surplus with the help of indifference curve technique?

A. Edgeworth
B. Alfred Marshall
C. J.R. Hick
D. Pareto
Answer» C. J.R. Hick
17.

Which among the following is NOT an assumption of Pareto optimality?

A. Every consumer wishes to maximize his level of satisfaction.
B. All the factors of production are used in the production of every commodity.
C. Conditions of perfect competition exist making all the factors of production perfectly mobile
D. The concept of utility is cardinal and cardinal utility function of every consumer is given.
Answer» D. The concept of utility is cardinal and cardinal utility function of every consumer is given.
18.

When a firm’s average revenue is equal to its average cost, it gets ________.

A. Sub normal profit
B. Normal profit
C. Abnormal profit
D. Super profit
Answer» B. Normal profit
19.

Given the price, if the cost of production increases because of higher price of raw materials, the supply

A. Decrease
B. Increase
C. Remains the same
D. Any of the above
Answer» A. Decrease
20.

Under __________________, price is determined by the interaction of total demand and total supply in the market.

A. Perfect competition
B. Monopoly
C. Imperfect competition
D. Monopolistic Competition
Answer» A. Perfect competition
21.

Standard of living of workers depends upon their

A. Nominal wages
B. Real wages
C. Average product
D. Govt. policy
Answer» B. Real wages
22.

Under Marginal productivity Theory, reward for labour is determined by

A. Owner
B. Labour
C. Government
D. Marginal Product
Answer» D. Marginal Product
23.

The economist Ricardo argued that prices were _____ because land rents were _______

A. High, High
B. Low, Low
C. Low, High
D. High, Low
Answer» D. High, Low
24.

As for the cost of production of an individual farmer, the rent paid by him

A. Enters into the price of his product
B. None of these
C. Does not enter into price of his product
D. Is unjustified
Answer» A. Enters into the price of his product
25.

He presented a theory of rent

A. Malthus
B. Prof. Knight
C. Ricardo
D. Marshall
Answer» C. Ricardo
26.

The following affect rent EXCEPT

A. Better location
B. Fertility of land
C. Cleverness of landlords
D. Scarcity of land
Answer» C. Cleverness of landlords
27.

These are kinds of rent EXCEPT

A. Differential rent
B. Scarcity rent
C. Mobility rent
D. Location rent
Answer» C. Mobility rent
28.

This is capital:

A. Money
B. Forests
C. Machinery
D. Trademarks
Answer» C. Machinery
29.

According to Keynes interest is a payment for

A. Consumer's preference
B. Producer's preference
C. Liquidity preference
D. State Bank's preference
Answer» C. Liquidity preference
30.

Interest is paid because

A. Capital is scarce
B. Capital is productive
C. Capital is attractive
D. Capital is surplus
Answer» A. Capital is scarce
31.

With decrease in price of bonds, rate of interest:

A. Decreases
B. Increases
C. Does not change
D. None of the above
Answer» B. Increases
32.

Every factor of production gets reward equal to its:

A. Cost
B. Marginal product
C. Price
D. Increasing return
Answer» B. Marginal product
33.

According to Keynes, interest is a payment for:

A. Use of durable goods
B. Use of capital
C. Use of money
D. Use of land
Answer» C. Use of money
34.

In economics capital refers to:

A. Money
B. High quality goods
C. Trade mark
D. Machinery and factories
Answer» D. Machinery and factories
35.

Professor Knight is famous for his theory of:

A. Rent
B. Profit
C. Population
D. Wages
Answer» B. Profit
36.

Profits:

A. Are residual payment
B. Are pre-determined
C. Are fixed contract
D. Are always higher than wages
Answer» A. Are residual payment
37.

Profits:

A. Are lower in the long run than in the short run
B. Can be negative
C. Are less in perfect competition than in monopoly
D. All of the above
Answer» D. All of the above
38.

Profits arise because an entrepreneur:

A. Prepares plan
B. Innovates
C. Lends money
D. Both (a) and (b
Answer» D. Both (a) and (b
39.

Gross profit does NOT include:

A. Rent of land owned by the firm
B. Pure profit
C. Interest on capital owned by firm
D. Taxes
Answer» D. Taxes
40.

Some economists say that profit earner is a kind of:

A. Wage earner
B. Rent receiver
C. Interest receiver
D. Govt. officer
Answer» A. Wage earner
41.

Risks in the business arise because of:

A. Introduction of the new products
B. Uncertain policy of rival firms
C. Changes in tastes
D. All the above
Answer» D. All the above
42.

According to Professor Knight risks are of _____ kinds:

A. two
B. three
C. four
D. many
Answer» A. two
43.

This is not a function of the entrepreneur:

A. Supervise
B. Innovate
C. Lend money
D. Prepare plan
Answer» C. Lend money
44.

According to Modern Theory of Rent, rent accrues to

A. Land only
B. Any factor
C. Capital only
D. Labour only
Answer» B. Any factor
45.

An increase in the wage rate:

A. Will usually lead to more people employed
B. Will decrease total earnings of employees if the demand for labour is wage elastic
C. Is illegal in a free market
D. Will cause a shift in the demand for labour
Answer» B. Will decrease total earnings of employees if the demand for labour is wage elastic
46.

A decrease in the supply of labour is likely to lead to:

A. A lower equilibrium wage and lower quantity of labour employed
B. A lower equilibrium wage and higher quantity of labour employed
C. A higher equilibrium wage and higher quantity of labour employed
D. A higher equilibrium wage and lower quantity of labour employed
Answer» D. A higher equilibrium wage and lower quantity of labour employed
47.

In order to maximize profits, a firm should produce at the output level for which

A. Average cost is minimised
B. Marginal cost equals marginal revenue
C. marginal cost is minimised
D. All of the above
Answer» B. Marginal cost equals marginal revenue
48.

A market system where there is only one buyer, is known as.

A. Monopoly
B. Monopolistic competition
C. Monopsony
D. Monopsonistic competition
Answer» C. Monopsony
49.

The market, where the services of factor of production are bought and sold is, is

A. Product market
B. Factor market
C. Commodity market
D. Monopoly market
Answer» B. Factor market
50.

Factor prices are determined in the market under forces of

A. Elasticity of demand
B. Elasticity of supply
C. Elasticity and supply
D. None of the above
Answer» D. None of the above
51.

The firm is in equilibrium in the factor market when it employs units of labour upto the point where

A. The marginal revenue product of labour is equal to its marginal cost
B. The marginal revenue product of labour is more than its marginal cost
C. The marginal revenue product of labour is less than its marginal cost
D. none
Answer» A. The marginal revenue product of labour is equal to its marginal cost
52.

A market system, where there is only one seller is known as

A. Monopoly
B. Monopolistic competition
C. Oligopoly
D. Monopsony
Answer» A. Monopoly
53.

Equilibrium in the factor market achieved at the factor price and factor quantity is given by

A. The intersection of the factor demand curve and the factor supply curve
B. The sum total of the elasticities of demand and supply
C. The product of the elasticities of demand and supply
D. none
Answer» A. The intersection of the factor demand curve and the factor supply curve
54.

Monopsony means

A. A single seller
B. A single buyer
C. Large number of buyers
D. None of the above
Answer» B. A single buyer
55.

Monopoly means

A. A single seller
B. A single buyer
C. Large number of buyers
D. None of the above
Answer» A. A single seller
56.

Factor prices are determined in the factor market under the forces of

A. Marginal productivity
B. Elasticity of demand
C. Elasticity of supply
D. Demand and supply
Answer» D. Demand and supply
57.

The labour market equilibrium determines the wage rate and

A. Investment
B. Employment
C. Savings
D. Profits
Answer» B. Employment
58.

Equilibrium conditions for factor market is

A. Demand for factors is equal to supply of factors
B. Demand for factors is less than supply of factors
C. Demand for factors is more than supply of factors
D. None of the above
Answer» A. Demand for factors is equal to supply of factors
59.

Demand for factor of production is

A. Supplementary demand
B. Intermediate goods
C. Derived demand
D. Complementary demand
Answer» C. Derived demand
60.

Factor market will be in equilibrium when

A. Demand for factors is less than its supply
B. Demand for factors is equal to supply of factors
C. Supply of factors is less than for it
D. All of the above
Answer» B. Demand for factors is equal to supply of factors
61.

Which of the following is not a factor of production?

A. Land
B. Labour
C. Money
D. Capital
Answer» C. Money
62.

A monopolist maximizes profit by producing the quantity at which

A. marginal revenue equals marginal cost.
B. marginal revenue equals price.
C. marginal cost equals price.
D. marginal cost equals demand.
Answer» A. marginal revenue equals marginal cost.
63.

The supply of a good refers to:

A. Stock available for sale
B. Total stock in the warehouse
C. Actual Production of the good
D. Quantity of the good offered for sale at a particular price per unit of time
Answer» D. Quantity of the good offered for sale at a particular price per unit of time
64.

The cost of one thing in terms of the alternative given up is called:

A. Real cost
B. Opportunity cost
C. Production cost
D. Physical cost
Answer» B. Opportunity cost
65.

The producer’s demand for a factor of production is governed by the ___ of that factor.

A. Price
B. Marginal Productivity
C. Availability
D. Profitability
Answer» B. Marginal Productivity
66.

Under conditions of perfect competition in the product market:

A. MRP = VMP
B. MRP > VMP
C. VMP > MRP
D. None of the above
Answer» A. MRP = VMP
67.

In a perfectly competitive market a firm in the long run will be in equilibrium when:

A. AC = MC
B. AR = MR
C. MR = MC
D. Price = AR = MR= AC= MC
Answer» D. Price = AR = MR= AC= MC
68.

Which of the following is a characteristic of capital as a factor of production?

A. It is fixed in supply
B. It never depreciates
C. It is a passive factor of production
D. It is an active factor of production
Answer» C. It is a passive factor of production
69.

On which law of consumption the concept of consumer’s surplus is based?

A. Engel’s law
B. Law of demand
C. First law of Gossen
D. Second law of Gossen
Answer» C. First law of Gossen
70.

The relation that the law of demand for factor defines is.

A. Income and quantity demanded of a factor
B. Price and quantity of a factor
C. Income and price of a factor
D. Quantity demanded and quantity supplied of a factor
Answer» B. Price and quantity of a factor
71.

Union leaders are in a better position to bargain for higher wages if demand for labour is

A. Elastic
B. Inelastic
C. Very large
D. Permanent
Answer» B. Inelastic
72.

Sometimes the supply curve of labour ends:

A. Downward
B. Upward
C. Backward
D. Firstly upward and then downward
Answer» C. Backward
73.

A firm maximizes profit if:

A. MRP = Wage rate
B. MRP is rising
C. MRP = ARP
D. None of these
Answer» A. MRP = Wage rate
74.

The opportunity cost of a machine which can produce only one product is:

A. Low
B. Infinite
C. High
D. Medium
Answer» A. Low
75.

When price is below equilibrium level, there will be:

A. Surplus commodity in the market
B. Supply curve will shift
C. Demand curve will shift
D. Shortage of commodity in the market
Answer» D. Shortage of commodity in the market
76.

If equilibrium price rises but equilibrium quantity remains unchanged, the cause is:

A. Supply and demand both decrease equally
B. Supply and demand both increase equally
C. Supply decreases and demand increases
D. Supply increases and demand decreases
Answer» C. Supply decreases and demand increases
77.

A decrease in demand causes the equilibrium price to:

A. Rise
B. Fall
C. Remain constant
D. Indeterminate
Answer» B. Fall
78.

Price of a product is determined in a free market:

A. By demand for the product
B. By supply of the product
C. By both demand and supply
D. By the government
Answer» C. By both demand and supply
79.

In market equilibrium, supply is vertical line. The downward sloping demand curve shifts to the rights. Then,

A. Price will rise
B. Quantity rises
C. Price remains same
D. Price will fall
Answer» A. Price will rise
80.

A rise in supply and demand in equal proportion will result in:

A. Increase in equilibrium price and decrease in equilibrium quantity
B. Decrease in equilibrium price and increase in equilibrium quantity
C. No change in equilibrium price and increase in equilibrium quantity
D. Increase in equilibrium price and no change in equilibrium quantity
Answer» C. No change in equilibrium price and increase in equilibrium quantity
81.

Every factor of production gets reward equal to:

A. Value of average product
B. Value of marginal product
C. Value of total product
D. Total revenue
Answer» B. Value of marginal product
82.

Under perfect competition, demand for a factor is its:

A. MRP curve
B. ARP curve
C. TRP curve
D. TR – TC
Answer» A. MRP curve
83.

We should employ units of a factor to a point where:

A. MR is negative
B. MP is equal to price of the factor
C. MP is positive
D. MP is rising
Answer» B. MP is equal to price of the factor
84.

If marginal product of labour rises because of new technology:

A. Wages will rise
B. Wages will fall
C. Wages will be unaffected
D. May rise or fall
Answer» A. Wages will rise
85.

Increasing the minimum wage for workers will:

A. Sole the unemployment problem
B. Result in scarcity of workers
C. Cause a substitution of capital for labour
D. Decrease the MP of those workers
Answer» C. Cause a substitution of capital for labour
86.

The price of capital is

A. money
B. Interest
C. profits
D. wages
Answer» B. Interest
87.

If MRP > Price of the factor: firm should hire

A. less factors
B. more factors
C. the same factors
D. All of the above
Answer» B. more factors
88.

If MRP = Price of the factor: firm should _______ at the unit of factor

A. less factors
B. more factors
C. stop hiring more
D. All of the above
Answer» C. stop hiring more
89.

If MRP < P of the factor, firm should hire

A. less factors
B. more factors
C. the same factors
D. All of the above
Answer» A. less factors
90.

The labor market equilibrium determines the wage rate and

A. market
B. employment
C. money
D. interest
Answer» B. employment
91.

Union leaders are in a worse position to bargain for higher wages if demand for labour is

A. perfectly Elastic
B. perfectly Inelastic
C. Very large
D. Permanent
Answer» A. perfectly Elastic
92.

The concept of social optimum was introduced in Welfare Economics by

A. Vilfredo Pareto
B. A. C. Pigou
C. Adam Smith
D. A. Marshall
Answer» A. Vilfredo Pareto
93.

An ethical or value judgement must be made in order to derive the

A. Transformation curve
B. Grand utility possibly curve
C. Consumption contract curve
D. Social welfare function
Answer» D. Social welfare function
94.

According to Kaldor-Hicks compensation criteria, the proposed change will increase the social welfare if

A. The gains are equal to the losses
B. The gains are greater than the losses
C. The losses are greater than the gains
D. None of the above
Answer» B. The gains are greater than the losses
95.

The concept of Social Welfare function was firstly introduced by

A. Pareto
B. Kaldor
C. Bergson
D. Samuelson
Answer» C. Bergson
96.

The first condition of which economist states that welfare is said to increase when national income increases

A. Kaldor-Hicks
B. Adam Smith
C. A. C. Pigou
D. Prof . Bergson
Answer» C. A. C. Pigou
97.

Compensation criterion principle is associated with the name of

A. Kaldor-Hicks
B. Vilfredo Pareto
C. A. C. Pigou
D. Prof . Bergson
Answer» A. Kaldor-Hicks
98.

Who proclaimed the ‘doctrine of invisible hand’?

A. Adam Smith
B. A. C. Pigou
C. Kaldor-Hicks
D. V. Pareto
Answer» A. Adam Smith
99.

Social Welfare function is a function of

A. All the individuals constituting the society
B. All consumers excluding producers
C. Only sample of individuals in society
D. None of the above
Answer» A. All the individuals constituting the society
100.

“Social welfare increases when transfer of real income from the rich to poor increases” is a statement given by

A. Kaldor-Hicks
B. A. C. Pigou
C. Pareto
D. Prof. Bergson
Answer» B. A. C. Pigou
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