160+ Principles of Micro Economics Solved MCQs

1.

The curve showing the possibilities of production of desired good is known as:

A. indifference curve
B. production possibility curve
C. revealed preference curve
D. none of these
Answer» B. production possibility curve
2.

Which one of the following definition of Economics is associated with the name of Lionel Robbins?

A. welfare definition
B. scarcity definition
C. growth definition
D. wealth definition
Answer» B. scarcity definition
3.

A hypothesis is tested by:

A. the realism of its assumptions
B. the lack of realism of its assumptions
C. its ability to predict accurately an outcome that follows logically from the assumptions
D. none of these
Answer» C. its ability to predict accurately an outcome that follows logically from the assumptions
4.

In a free enterprise economy, the problems of what, how and for whom to produce are solved by :

A. a planning committee
B. the price mechanism
C. the planning commission
D. none of these.
Answer» B. the price mechanism
5.

Who considered Political Economy as “an enquiry into the nature and causes of the wealth of nations”?

A. adam smith
B. j.b.say
C. marshall
D. keynes
Answer» A. adam smith
6.

Which of the following definitions of Economics include the economic concept of ‘scales of Preferences’?

A. wealth definition
B. welfare definition
C. scarcity definition
D. growth definition
Answer» C. scarcity definition
7.

Which of the following embodies a more widely accepted definition of economics?

A. science of material welfare
B. science of wealth
C. a study of mankind in the ordinary business of life
D. science of making choice.
Answer» D. science of making choice.
8.

The fundamental problem faced by an economy is one of :

A. exchange
B. decision making by the government
C. economic welfare
D. scarcity of resources and multiplicity of wants.
Answer» D. scarcity of resources and multiplicity of wants.
9.

Production possibilities curve does not show:

A. what to produce
B. how to produce
C. for whom to produce
D. productive potential under conditions of underemployment
Answer» D. productive potential under conditions of underemployment
10.

State whether Economics is :

A. a positive science only
B. neither a positive science
C. a science but not art
D. a science or an art depending on who uses economics and for what purpose.
Answer» D. a science or an art depending on who uses economics and for what purpose.
11.

Who of the following emphasized the normative aspect of Economics as a science?

A. the english classical school
B. lionel robbins
C. the german historical school
D. none of these.
Answer» C. the german historical school
12.

Of the following economists who is considered as master of partial analysis?

A. alfred marshall
B. a.c.pigou
C. j.m.keynes
D. j.s.mill.
Answer» A. alfred marshall
13.

Which of the following statements has been drawn by inductive method?

A. a consumer will buy from the cheapest market
B. all businessmen wish to buy at low price and sell at high price
C. a private firm will try to maximize its profits
D. the larger the stock of money with a person, the lower is the utility that he
Answer» B. all businessmen wish to buy at low price and sell at high price
14.

What is true for deductive method?

A. abstract
B. realistic
C. economic conditions assumed to be changing
D. supported by historical school.
Answer» A. abstract
15.

What is true for inductive method?

A. hypothetical
B. empirical
C. ignores experimentation
D. static
Answer» B. empirical
16.

Find out the correct statement:

A. prediction of economic models cannot be refuted by empirical evidence
B. models transform verbal expressions in to more scientific expressions
C. models make no assumptions
D. economic models are comprehensive and not partial
Answer» B. models transform verbal expressions in to more scientific expressions
17.

Micro economic theory studies how a free enterprise economy determines:

A. the price of goods
B. the price of services
C. the price of resources
D. all of these.
Answer» A. the price of goods
18.

Which aspect of taxation involves normative economics?

A. the incidence of the tax
B. the fairness of the tax
C. the effect of the tax on incentives to work
D. all of the above
Answer» B. the fairness of the tax
19.

Microeconomics deals primarily with:

A. comparative statics, general equilibrium and positive economics
B. comparative statics, partial equilibrium and normative economics
C. dynamics, partial equilibrium and positive economics
D. comparative statics, partial equilibrium and positive economics.
Answer» D. comparative statics, partial equilibrium and positive economics.
20.

Which of the following is incorrect?

A. microeconomics is concerned primarily with the problem of what , how and for whom to produce
B. microeconomics is concerned primarily with the economic behavior of individual decision making units when at equilibrium
C. microeconomics is concerned primarily with the time path and processes by which one equilibrium position evolves into another
D. microeconomics is concerned primarily with comparative statics rather than dynamics.
Answer» C. microeconomics is concerned primarily with the time path and processes by which one equilibrium position evolves into another
21.

Which of the following statements is most closely associated with general equilibrium analysis?

A. everything depends on everything else
B. the equilibrium price of a factor depends on the balancing of the forces of demand and supply for that factor
C. the equilibrium price of a good or service depends on the balancing of the forces of demand and supply for that good or service
D. none of these
Answer» A. everything depends on everything else
22.

The meaning of the word ‘economic’ is most closely associated with the word:

A. free
B. scarce
C. unlimited
D. unrestricted
Answer» B. scarce
23.

The market equilibrium for a commodity is determined by

A. the market demand for the commodity
B. the market supply of the commodity
C. the balancing of the forces of demand and supply for the commodity
D. any of these
Answer» C. the balancing of the forces of demand and supply for the commodity
24.

Microeconomics studies the decision making behavior of:

A. society as a whole
B. an individual or household
C. a group of individuals
D. economy as a whole
Answer» B. an individual or household
25.

The word micro was first used in Economics by:

A. keynes
B. ragnar frisch
C. j.r.hicks
D. marshall
Answer» B. ragnar frisch
26.

A function refers to :

A. the demand for a commodity
B. the supply of a commodity
C. the demand and supply of a commodity service or resource
D. the relationship between one dependent variable and one or more independent variables.
Answer» D. the relationship between one dependent variable and one or more independent variables.
27.

The validity of an economic theory is judged by its power to:

A. explain an economic phenomenon
B. predict the course of an economic phenomenon
C. prove or disprove a hypothesis
D. reveal the economic laws
Answer» A. explain an economic phenomenon
28.

The subject matter of economics is the study of:

A. wealth
B. welfare
C. scarcity
D. scarcity and choice
Answer» D. scarcity and choice
29.

To whom do you attribute the ‘growth’ definition of economics?

A. paul samuelson
B. lionel robbins
C. milton friedman
D. alfred marshall
Answer» A. paul samuelson
30.

The first economist who coined the terms micro economics and macroeconomics

A. ragnar frisch
B. keynes
C. marshall
D. friedman
Answer» A. ragnar frisch
31.

Microeconomics deals with:

A. the theory of factor pricing
B. the theory of product pricing
C. the theory of economic welfare
D. all the above
Answer» D. all the above
32.

Prof. Robbin’s definition of Economics is:

A. scarcity definition
B. growth definition
C. welath definition
D. welfare definition
Answer» A. scarcity definition
33.

A theory is:

A. an assumption
B. a validated hypothesis
C. an ‘if then’ proposition
D. a hypothesis
Answer» B. a validated hypothesis
34.

The book ‘Principles of Economics’ was written by:

A. keynes
B. marshall
C. samuelson
D. pigou
Answer» B. marshall
35.

Average revenue is :

A. tr - tc
B. tr / no. of units sold
C. tc / tr
D. mc / ar
Answer» B. tr / no. of units sold
36.

A hypothesis is a :

A. statement of facts
B. statement of observations made by a researcher
C. statement of expected out of research
D. a proposition the validity of which is to be tested
Answer» D. a proposition the validity of which is to be tested
37.

In the classical system, the basic economic problems are solved by:

A. government
B. price mechanism
C. economists
D. central bank
Answer» B. price mechanism
38.

Growth definition of economics was concerned with:

A. scarcity
B. welfare
C. wealth
D. economic growth
Answer» D. economic growth
39.

A market:

A. necessarily refers to a meeting place between buyers and sellers
B. does not necessarily refer to a meeting place between buyers and sellers
C. extends over the entire nation
D. extends over a city.
Answer» B. does not necessarily refer to a meeting place between buyers and sellers
40.

The average fixed cost is obtained by :

A. tfc / q
B. mc / q
C. tac / q
D. avc / q
Answer» A. tfc / q
41.

Average Revenue curve under monopoly is :

A. upward slopping
B. downward slopping
C. horizontal straight line
D. none of these
Answer» B. downward slopping
42.

_______ investigations examine an individual’s relationship with and interaction in society

A. natural science
B. physical science
C. life science
D. social science
Answer» D. social science
43.

In the 19th century _________ argued that ideas pass through three rising stages namely, Theological, Philosophical and Scientific.

A. auguste comte
B. plato
C. aristotle
D. socrates
Answer» A. auguste comte
44.

_________ is distinctive for much greater use of mathematics than the other social sciences, a development made possible by the development of a concept of utility

A. sociology
B. political science
C. economics
D. anthropology
Answer» C. economics
45.

The most important founder of German sociology, __________ , was keenly interested in maintaining the relationship between economics and sociology.

A. max adler
B. max weber
C. karl marx
D. joseph w. eaton
Answer» B. max weber
46.

International Social Science Associations were founded under the auspices of___________

A. unesco
B. world bank
C. imf
D. usa
Answer» A. unesco
47.

________ social science discipline deals with the integration of different aspects of the Social Sciences, Humanities, and Human Biology

A. criminology
B. demography
C. geography
D. anthropology
Answer» D. anthropology
48.

Social science can help to appreciate the values enshrined in the Indian Constitution such as justice, liberty, equality and fraternity and the unity and integrity of the nation and the building of a socialist, secular and democratic society.

A. true
B. false
C. none
D. none
Answer» A. true
49.

______is primarily done by observing or testing on real-life data or analysing the pattern of some specific events in order to identify the nature or the class of trend that specific phenomenon maintains.

A. empirical research
B. action research
C. laboratory research
D. exploratory research
Answer» A. empirical research
50.

_____ has distinguished between different types of societies on basis of economic system.

A. joseph w. eaton
B. max webber
C. karl marx
D. alphons silbermann
Answer» C. karl marx
51.

Mannheim defines ________as the sum of those methods by which a society tries to influence human behavior to maintain a given order.

A. social control
B. constitution
C. policing
D. democracy
Answer» A. social control
52.

Implicit costs are:

A. equal to total fixed costs.
B. comprised entirely of variable costs.
C. "payments" for self-employed resources.
D. always greater in the short run than in the long run.
Answer» C. "payments" for self-employed resources.
53.

Which would be an implicit cost for a firm? The cost:

A. of worker wages and salaries for the firm.
B. paid for leasing a building for the firm.
C. paid for production supplies for the firm.
D. of wages foregone by the owner of the firm.
Answer» D. of wages foregone by the owner of the firm.
54.

If a firm's revenues just cover all its opportunity costs, then:

A. normal profit is zero.
B. economic profit is zero.
C. total revenues equal its explicit costs.
D. total revenues equal its implicit costs.
Answer» B. economic profit is zero.
55.

Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used to produce it. Which is true?

A. the firm will earn accounting and economic profits.
B. the firm will face accounting and economic losses.
C. the firm will face an accounting loss, but earn economic profits.
D. the firm may earn accounting profits, but will face economic losses.
Answer» D. the firm may earn accounting profits, but will face economic losses.
56.

Suppose that a firm produces 200,000 units a year and sells them all for Rs.10 each. The explicit costs of production are Rs.1,500,000 and the implicit costs of production are Rs. 300,000. The firm has an accounting profit of:

A. rs. 500,000 and an economic profit of rs. 200,000.
B. rs. 400,000 and an economic profit of rs. 200,000.
C. rs. 300,000 and an economic profit of rs. 400,000.
D. rs. 200,000 and an economic profit of rs. 500,000.
Answer» A. rs. 500,000 and an economic profit of rs. 200,000.
57.

The short run is a time period in which:

A. all resources are fixed.
B. the level of output is fixed.
C. the size of the production plant is variable.
D. some resources are fixed and others are variable.
Answer» D. some resources are fixed and others are variable.
58.

The law of diminishing returns only applies in cases where:

A. there is increasing scarcity of factors of production.
B. the price of extra units of a factor is increasing.
C. there is at least one fixed factor of production.
D. capital is a variable input.
Answer» C. there is at least one fixed factor of production.
59.

The marginal product of labor curve shows the change in total product resulting from:

A. one-unit increase in the quantity of a particular resource used, letting other resources vary.
B. one-unit increase in the quantity of a particular resource used, holding constant other resources.
C. change in the cost of a variable resource.
D. change in the cost of a fixed resource.
Answer» B. one-unit increase in the quantity of a particular resource used, holding constant other resources.
60.

When the total product curve is falling, the:

A. marginal product of labor is zero.
B. marginal product of labor is negative.
C. average product of labor is increasing.
D. average product of labor must be negative
Answer» B. marginal product of labor is negative.
61.

When marginal product reaches its maximum, what can be said of total product?

A. total product must be at its maximum
B. total product starts to decline even if marginal product is positive
C. total product is increasing if marginal product is still positive
D. total product levels off
Answer» C. total product is increasing if marginal product is still positive
62.

Variable costs are:

A. sunk costs.
B. multiplied by fixed costs.
C. costs that change with the level of production.
D. defined as the change in total cost resulting from the production of an additional unit of output.
Answer» C. costs that change with the level of production.
63.

Which is not a fixed cost?

A. monthly rent of rs. 1,000 contractually specified in a one-year lease
B. an insurance premium of rs. 50 per year, paid last month
C. an attorney\s retainer of rs. 50,000 per year
D. a worker\s wage of rs. 15 per hour
Answer» D. a worker\s wage of rs. 15 per hour
64.

If you know that with 8 units of output, average fixed cost is Rs. 12.50 and average variable cost is Rs. 81.25, then total cost at this output level is:

A. rs. 93.75.
B. rs. 97.78.
C. rs. 750.
D. rs. 880.
Answer» C. rs. 750.
65.

With fixed costs of Rs. 400, a firm has average total costs of Rs. 3 and average variable costs of Rs. 2.50. Its output is:

A. 200 units.
B. 400 units.
C. 800 units.
D. 1,600 units.
Answer» C. 800 units.
66.

The reason the marginal cost curve eventually increases as output increases for the typical firm is because:

A. of diseconomies of scale.
B. of minimum efficient scale.
C. of the law of diminishing returns.
D. normal profit exceeds economic profit.
Answer» C. of the law of diminishing returns.
67.

If the short-run average variable costs of production for a firm are rising, then this indicates that:

A. average total costs are at a maximum.
B. average fixed costs are constant.
C. marginal costs are above average variable costs.
D. average variable costs are below average fixed costs.
Answer» C. marginal costs are above average variable costs.
68.

If a more efficient technology was discovered by a firm, there would be:

A. an upward shift in the avc curve.
B. an upward shift in the afc curve.
C. a downward shift in the afc curve.
D. a downward shift in the mc curve.
Answer» D. a downward shift in the mc curve.
69.

A firm encountering economies of scale over some range of output will have a:

A. rising long-run average cost curve.
B. falling long-run average cost curve.
C. constant long-run average cost curve.
D. rising, then falling, then rising long-run average cost curve.
Answer» B. falling long-run average cost curve.
70.

If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be:

A. economies of scale.
B. diseconomies of scale.
C. constant returns to scale.
D. increasing average total costs.
Answer» C. constant returns to scale.
71.

Which of the following statements best describes the general form of a production function:
(i) It is a purely technological relationship between quantities of input and quantities of output.
(ii) It represents the technology of an organisation, sector of an economy.
(iii) Prices of inputs or of the output do not enter into the production function.
(iv) It is a flow concept describing the transformation of inputs into output per unitof time.

A. (i),(ii) and (iv)
B. (i) and (ii)
C. (i) and (iv)
D. all of the above
Answer» D. all of the above
72.

Which of the following statements describes the presence of diminishing returns. Holding at least one factor constant …....

A. the marginal product of a factor is positive and rising.
B. the marginal product of a factor is positive but falling.
C. the marginal product of a factor is falling and negative.
D. the marginal product of a factor is constant.
Answer» B. the marginal product of a factor is positive but falling.
73.

Which of the following statements describes increasing returns to scale:

A. doubling the inputs used leads to double 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.
Answer» C. increasing inputs by 1/4 leads to an increase in output of 1/3.
74.

Economies of scale exist if:

A. as the amount of capital increases, the cost of producing per unit rises
B. as the amount of capital increases, the cost of producing per unit falls
C. as the amount of capital increases, the marginal cost rises
D. as the amount of capital increases, the marginal physical product falls
Answer» B. as the amount of capital increases, the cost of producing per unit falls
75.

Whenever marginal product is declining with increasing use of an input,

A. total product is declining as input increases.
B. average product is declining as input use increases
C. marginal product is greater than average product
D. total product is increasing at a decreasing rate as input use increases.
Answer» D. total product is increasing at a decreasing rate as input use increases.
76.

Whenever marginal product is increasing with increasing use of an input,

A. total product is increasing at a decreasing rate
B. total product is increasing at an increasing rate
C. marginal product is less than average product
D. average product is decreasing.
Answer» B. total product is increasing at an increasing rate
77.

When average product is at a maximum, marginal product is

A. zero
B. increasing
C. equal to average product
D. greater than average product
Answer» C. equal to average product
78.

Whenever average product is declining, with increases in input usage,

A. marginal product is less than average product
B. total product is declining with increases in input
C. total product is increasing with increases in input
D. marginal product is greater than average product
Answer» B. total product is declining with increases in input
79.

The total product curve may initially show output increasing at an increasing rate as more labour is hired because of the:

A. declining quality of the labor force.
B. principle of comparative advantage.
C. law of diminishing marginal returns.
D. increase in marginal physical product.
Answer» D. increase in marginal physical product.
80.

If labour is the only variable resource and its marginal physical product falls as more workers are hired:

A. the law of diminishing marginal returns is at work.
B. marginal cost is rising.
C. average cost may still be declining.
D. average physical product may still be rising.
Answer» A. the law of diminishing marginal returns is at work.
81.

When both average and total product are greater than zero, and marginal product equals average product, then total product:

A. is at a maximum.
B. is positive and rising.
C. is falling.
D. is negative but rising.
Answer» B. is positive and rising.
82.

Costs incurred only when production occurs are known as:

A. explicit costs.
B. fixed costs.
C. variable costs.
D. technological expenses.
Answer» C. variable costs.
83.

The law of diminishing marginal returns is encountered as increasing amounts of labour are hired because:

A. as production rises, the additional labor hired is less and less skilled.
B. experienced workers are hired before the less skilled.
C. each extra worker hired decreases the amounts of land and capital per worker, so the work place becomes more congested and managerial control becomes more difficult.
D. as more and more is produced, selling it requires cutting prices.
Answer» C. each extra worker hired decreases the amounts of land and capital per worker, so the work place becomes more congested and managerial control becomes more difficult.
84.

Which of the following is irrelevant for rational decision making?

A. total variable cost (tvc)
B. explicit cost.
C. average fixed cost (afc).
D. marginal cost (mc).
Answer» A. total variable cost (tvc)
85.

A curve that can never be “U” shaped is the:

A. average variable cost curve.
B. marginal cost curve.
C. average fixed cost curve.
D. average total cost curve.
Answer» C. average fixed cost curve.
86.

Diminishing marginal returns are most compatible with:

A. economies of scale.
B. advantages from specialization.
C. positively-sloped marginal cost curves
D. depreciation of the capital stock.
Answer» B. advantages from specialization.
87.

If average variable costs fall as output grows:

A. marginal costs must also be declining.
B. fixed cost must also be declining.
C. total cost must also be declining.
D. average cost must be below average variable cost.
Answer» C. total cost must also be declining.
88.

In economic theory the costs of a firm

A. tend to be less than the everyday use of the term costs would suggest
B. includes implicit as well as explicit outlays
C. always decline as more output is produced
D. are usually defined in such a way that profits will be larger than the
Answer» B. includes implicit as well as explicit outlays
89.

The average total costs of the firm as defined in standard economic theory

A. are the sum of the fixed and any variable costs divided by the number of units of labour input
B. are the sum of the fixed and any variable costs
C. are the sum of the average fixed and the total variable costs
D. are the sum of the fixed and variable costs divided by the number of units of output
Answer» D. are the sum of the fixed and variable costs divided by the number of units of output
90.

The short run as the term is used in connection with the theory of the firm is a period of time:

A. too short for the firm to vary all its inputs
B. no more than a week
C. long enough for the firm to vary the quantity of all its inputs
D. in which the fixed costs are zero
Answer» A. too short for the firm to vary all its inputs
91.

According to the principle of diminishing marginal physical productivity, in the short run

A. as output increases, costs per unit of output must eventually decline
B. marginal product will decrease continually as output is expanded
C. as output is increased, the quantity of inputs needed to produce additional units of output will increase, causing costs per unit of output to increase
D. total output will become negative once marginal product begins to decline
Answer» C. as output is increased, the quantity of inputs needed to produce additional units of output will increase, causing costs per unit of output to increase
92.

Economies of scale

A. set in as soon as diminishing marginal physical productivity is experienced
B. are usually considered to be a phenomenon of the long run
C. are not always available in the short run
D. help ensure that industries will be competitive rather than monopolized
Answer» B. are usually considered to be a phenomenon of the long run
93.

Marginal costs and average variable costs are equal when

A. average variable cost is a maximum
B. average variable cost is rising
C. average variable cost is falling
D. average variable cost is a minimum
Answer» D. average variable cost is a minimum
94.

Theory of demand examines the behaviour of the--------

A. Consumer
B. Producer
C. Firm
D. Industry
Answer» A. Consumer
95.

The want satisfying power of a commodity:

A. Satisfaction
B. Utility
C. Value
D. Marginal Utility
Answer» B. Utility
96.

Utility is the concept which is:

A. Objective
B. Subjective
C. Both
D. None
Answer» B. Subjective
97.

Change in utility resulting from one unit change in consumption is called:

A. Total Utility
B. Extra Utility
C. Marginal Utility
D. Average Utility
Answer» C. Marginal Utility
98.

When Total Utility is maximum, Marginal Utility is :

A. Zero
B. Negative
C. Positive
D. One
Answer» A. Zero
99.

When Marginal Utility is negative, Total Utility:

A. Declines
B. Increases
C. Remains the same
D. None of these
Answer» A. Declines
100.

Saturation point is the point where:

A. TU = 0
B. MU = 0
C. MU is +ve
D. TU = 1
Answer» B. MU = 0
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