160+ Principles of Micro Economics Solved MCQs

101.

Measurable utility is the postulate of:

A. Neo-Classical school
B. Ordinalist school
C. Behaviourist school
D. Keneysians
Answer» A. Neo-Classical school
102.

Which of the following is Gossen’s first law:

A. Law of Diminishing Marginal Utility
B. Law of Equi Marginal Utility
C. Law of substitution
D. Law of Diminishing Returns
Answer» A. Law of Diminishing Marginal Utility
103.

In the case of a free good, the consumer will be in equilibrium when:

A. MU = P
B. MU = 0
C. TU = 0
D. TU =1
Answer» B. MU = 0
104.

Change in demand due to a change in the price of related good :

A. Cross demand
B. Price demand
C. Income demand
D. None of these
Answer» A. Cross demand
105.

The Price and quantity relationship for an inferior good is:

A. Direct
B. Inverse
C. Positive
D. Indirect
Answer» B. Inverse
106.

In the case of normal goods, the quantity demanded varies inversely with:

A. Price of good
B. Income of the consumer
C. Fashion of the good
D. Savings
Answer» A. Price of good
107.

Which of the following is a cardinalist approach to demand analysis:

A. Marshallian utility analysis
B. Indifference Curve Analysis
C. Revealed Preference Theory
D. None of these
Answer» A. Marshallian utility analysis
108.

The convexity of an indifference curve shows:

A. Diminishing MRS
B. Increasing MRS
C. Constant MRS
D. None
Answer» A. Diminishing MRS
109.

A movement from one point to another along an indifference curve makes the satisfaction:

A. Increasing
B. Decreasing
C. Unaltered
D. None
Answer» C. Unaltered
110.

In the case of an indifference curve

A. dU/dX>dU/dY
B. dU/dX = dU/dY
C. dU/dX<dU/dY
D. dU/dX≤dU/Dy
Answer» B. dU/dX = dU/dY
111.

An Indifference Curve to the right of another represents combinations which are:

A. Indifferent
B. Preferable
C. Inferior
D. Superior
Answer» B. Preferable
112.

As moving from left to right through an indifference curve, the MRS of X for Y

A. Increases
B. Remains the same
C. Decreases
D. Both A and C
Answer» C. Decreases
113.

The slope of an indifference curve represents:

A. Price ratio of good X and Y
B. MRTS L,K
C. MRSx,y
D. MRS
Answer» C. MRSx,y
114.

In the case of perfect complementaries, the MRS between goods is:

A. Zero
B. Positive
C. Negative
D. None
Answer» A. Zero
115.

In a combination of X and Y, if price of Y alone changes, the X intercept will :

A. Rotate upwards
B. Rotate downwards
C. Not be changed
D. Parallel
Answer» C. Not be changed
116.

At the point of tangency of an indifference curve with a budget line:

A. MRSxy =Px/Py
B. MRSxy>Px/PY
C. MRSxy<Px/PY
D. MRSxy≥Px/PY
Answer» A. MRSxy =Px/Py
117.

Commodities bought in larger quantities when income rises are called:

A. Normal goods
B. Inferior goods
C. Giffen goods
D. None
Answer» A. Normal goods
118.

Change in demand due to change in relative price alone is called:

A. Income effect
B. Substitution effect
C. Price effect
D. Ratchet effect
Answer» B. Substitution effect
119.

Substitution Effect is:

A. Always negative
B. Always positive
C. Seldom negative
D. Zero
Answer» A. Always negative
120.

If income effect works in the same direction to that of substitution effect, the good is a:

A. Normal good
B. Inferior good
C. Giffen good
D. Superior Good
Answer» A. Normal good
121.

If income effect works in the direction opposite to that of substitution effect, the good is not:

A. Giffen good
B. Inferior good
C. Normal good
D. Superior Good
Answer» C. Normal good
122.

Introspection is not the basis of :

A. Marshallian utility analysis
B. Indifference Curve Analysis
C. Revealed Preference Hypothesis
D. Demand Analysis
Answer» C. Revealed Preference Hypothesis
123.

The ordering of combinations on an indifference curve is:

A. Weak
B. Strong
C. Average
D. None
Answer» A. Weak
124.

Strong ordering is a distinguishing feature of the theory given by:

A. Marshall
B. Hicks
C. Samuelson
D. Adam Smith
Answer» C. Samuelson
125.

Father of Economics:

A. Marshall
B. David Ricardo
C. Adam Smith
D. J.M. Keynes
Answer» C. Adam Smith
126.

The Wealth of Nations is the work of:

A. Marshall
B. J.S. Mill
C. Adam Smith
D. Lionel Robins
Answer» C. Adam Smith
127.

Indifference Approach is related with:

A. Marshall
B. J.R. Hicks
C. Samuelson
D. Sismondi
Answer» B. J.R. Hicks
128.

Which one of the following is an example of close substitute:

A. Tea and Coffee
B. Milk and water
C. Bread and Butter
D. Pen and pencil
Answer» A. Tea and Coffee
129.

The addition to the total revenue by the sale of an additional unit is:

A. Total revenue
B. Average revenue
C. Value added
D. Marginal revenue
Answer» D. Marginal revenue
130.

Which cost is to be incurred by a firm even if output is zero:

A. Opportunity cost
B. Fixed cost
C. Variable Cost
D. Total cost
Answer» B. Fixed cost
131.

The marginal utility theory is contributed by:

A. Marshall
B. David Ricardo
C. Adam Smith
D. Samuelson
Answer» A. Marshall
132.

The factor earning of entrepreneur is:

A. Rent
B. Wage
C. Interest
D. Profit
Answer» D. Profit
133.

The Scarcity definition of Economics is the contribution of:

A. Samuelson
B. Adam Smith
C. Lionel Robbins
D. Marshall
Answer» C. Lionel Robbins
134.

Average Revenue is equal to:

A. Price
B. Cost
C. Profit
D. None of these
Answer» A. Price
135.

Total Revenue is the maximum when Marginal Revenue is ----------

A. Positive
B. Negative
C. One
D. Zero
Answer» D. Zero
136.

Market economy is also known as:

A. Socialist economy
B. Capitalist economy
C. Mixed economy
D. Developing economy
Answer» B. Capitalist economy
137.

For complementary goods, the cross elasticity of demand:

A. Positive
B. Negative
C. Zero
D. None
Answer» B. Negative
138.

Relation between price of a commodity and demand for another commodity is measured by:

A. Price elasticity
B. Income elasticity
C. Cross elasticity
D. Elasticity of substitution
Answer» C. Cross elasticity
139.

The demand curve for Giffen’s goods:

A. Vertical
B. Horizontal
C. Negative slope
D. Positive slope
Answer» D. Positive slope
140.

When Q = f (P), the elasticity coefficient is measured by:

A. ΔQ/ΔP / P/Q
B. ΔP/ΔQ * Q/P
C. ΔQ/ΔP * P/Q
D. P/ΔQ / Q/P
Answer» C. ΔQ/ΔP * P/Q
141.

Income elasticity of demand for inferior goods is:

A. Negative
B. Positive
C. Zero
D. Unity
Answer» A. Negative
142.

In the case of luxury goods, the income elasticity of demand will be:

A. Less than unity
B. Unity
C. More than unity
D. All the above
Answer» C. More than unity
143.

Income elasticity is positive, but less than unity in the case of:

A. Necessity
B. Luxury
C. Inferior
D. Substitutes
Answer» A. Necessity
144.

The change in demand is due to the change in :

A. Income
B. Own price
C. Prices of related products
D. Expectations
Answer» B. Own price
145.

Supply curve represents -------- relationship between quantity and price

A. Direct
B. Inverse
C. Either direct or inverse
D. None of the above
Answer» A. Direct
146.

A market:

A. Necessarily refers to a meeting place between buyer and sellers
B. Does not necessarily refers to a meeting place between buyer and sellers
C. Extends over the entire country
D. Extends over a city
Answer» B. Does not necessarily refers to a meeting place between buyer and sellers
147.

The market equilibrium for a commodity is determined by:

A. Market demand
B. Market supply
C. Balancing of the forces of demand and supply
D. Any of the above
Answer» C. Balancing of the forces of demand and supply
148.

A fall in the price of the commodity holding everything else constant results in:

A. Increase in demand
B. Decrease in demand
C. Increase in quantity demanded
D. Decrease in quantity demanded
Answer» C. Increase in quantity demanded
149.

When the price of the substitute commodity of X falls, the demand for X:

A. Rises
B. Falls
C. Remains unchanged
D. All of the above is possible
Answer» B. Falls
150.

If the income elasticity of demand is greater than one, then the commodity is:

A. Necessity
B. Luxury
C. Inferior
D. Non-related commodity
Answer» A. Necessity
151.

If a positively sloped linear supply curve crosses the quantity axis, the elasticity of supply is:

A. Inelastic
B. Elastic
C. Unitary elastic
D. Perfectly elastic
Answer» A. Inelastic
152.

The horizontal supply curve parallel to quantity axis represents:

A. Elastic supply
B. Inelastic supply
C. Perfectly elastic supply
D. Perfectly inelastic supply
Answer» C. Perfectly elastic supply
153.

A fall in income of the consumer, other things being equal, causes:

A. Increase in demand
B. Decrease in demand
C. Increase in quantity demanded
D. Decease in quantity demanded
Answer» A. Increase in demand
154.

Which of the following causes an increase in supply:

A. Fall in price of inputs
B. Increase in number of producers
C. Decrease in the price of production substitutes
D. All of the above
Answer» D. All of the above
155.

Cross elasticity of demand in the case of substitutes:

A. Zero
B. Negative
C. Positive
D. Infinity
Answer» C. Positive
156.

A movement down the given demand curve shows:

A. Increase in demand
B. Decrease in demand
C. Extension in demand
D. Contraction in demand
Answer» C. Extension in demand
157.

Which of the following results in an increase in an increase in demand:

A. Fall in prices of substitutes
B. Increase in price of complementary goods
C. Fall in consumer’s income
D. None of the above
Answer» D. None of the above
158.

Change in quantity supplied of a product can result from:

A. Changes in own price
B. Changes in cost of production
C. Change in technology
D. Change in price of related products
Answer» A. Changes in own price
159.

An increase in supply means:

A. Movement down given supply curve
B. Movement upward given supply curve
C. Leftward shift in supply curve
D. Rightward shift in supply curve
Answer» D. Rightward shift in supply curve
160.

At prices above the equilibrium price:

A. Quantity supplied exceeds quantity demanded
B. Quantity demanded exceeds quantity supplied
C. There is shortage
D. All of the above is possible
Answer» A. Quantity supplied exceeds quantity demanded
161.

An increase in market supply, demand remaining the same causes:

A. Increase in equilibrium price
B. Decrease in equilibrium quantity
C. Decrease in equilibrium price and increase in equilibrium quantity
D. Both equilibrium price and quantity rises
Answer» C. Decrease in equilibrium price and increase in equilibrium quantity
162.

An increase in market demand, supply remaining the same results in:

A. Decrease in equilibrium price
B. Decrease in equilibrium quantity
C. Decrease in equilibrium price and increase in equilibrium quantity
D. Both equilibrium price and quantity rises
Answer» D. Both equilibrium price and quantity rises
163.

A fall in the market demand, supply remaining the same results in:

A. Increase in equilibrium price
B. Increase in equilibrium quantity
C. Increase in equilibrium price and decrease in equilibrium quantity
D. Both equilibrium price and quantity falls
Answer» D. Both equilibrium price and quantity falls
164.

Which one of the following elasticities takes the average of prices and quantities:

A. Point elasticity of demand
B. Arc elasticity of demand
C. Income elasticity of demand
D. Cross elasticity of demand
Answer» B. Arc elasticity of demand
165.

When demand curve is rectangular hyperbola, the value of price elasticity of demand will be:

A. Zero
B. One
C. Greater than one
D. Infinity
Answer» B. One
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