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90+ Public Economics Solved MCQs

These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Bachelor of Arts in Economics (BA Economics) .

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51.

The Finance Commission is appointed in every

A. 3 year
B. 4 year
C. 5 year
D. 6 year
Answer» C. 5 year
discuss
52.

The maximum effect of direct taxes is on

A. price of food
B. income
C. capital goods
D. consumer goods
Answer» B. income
discuss
53.

The Wanchoo Committee (1971) probed into

A. direct taxes
B. indirect taxes
C. agricultural holding tax
D. non‐tax revenue
Answer» A. direct taxes
discuss
54.

Modvat means

A. modified value added tax
B. moderate value added tax
C. modest value added tax
D. modern value added tax
Answer» A. modified value added tax
discuss
55.

The revenue of the State Government is raised from the following sources except one, which is that?

A. land revenue
B. agricultural income tax
C. entertainment tax
D. expenditure tax
Answer» D. expenditure tax
discuss
56.

The Finance Commission does all the following functions except one, which is that?

A. works out allocation of taxes in the divisible pool
B. looks into financial relations between the centre and the states
C. allocates grants ‐ in – aid to the states and union territories
D. assist the planning commission in making 5 year plans.
Answer» D. assist the planning commission in making 5 year plans.
discuss
57.

Primary deficit means:

A. fiscal deficit‐ interest
B. revenue deficit‐interest payments
C. fiscal deficit+ revenue deficit
D. budgetary deficit
Answer» A. fiscal deficit‐ interest
discuss
58.

Non‐Plan Grants are determined by

A. planning commission
B. finance commission
C. central government
D. state government
Answer» C. central government
discuss
59.

Public Debt Management refers to

A. terms of new bonds
B. proportion of different components of public debt
C. maturity
D. all the above
Answer» D. all the above
discuss
60.

Public Expenditure increases

A. interest rate
B. employment
C. exports
D. imports
Answer» B. employment
discuss
61.

Central Assistance for State and UT plan is a part of

A. plan expenditure
B. revenue expenditure
C. non‐plan expenditure
D. none of the above
Answer» C. non‐plan expenditure
discuss
62.

There is a view that reduced rates on income tax would lead to a significant rise in income tax revenue. This view has been attributed to

A. herbert simon
B. arthur laffer
C. robert lucas
D. j.b. say
Answer» B. arthur laffer
discuss
63.

Functional Finance functions through

A. buying and selling
B. giving and taking
C. lending and borrowing
D. all the above
Answer» D. all the above
discuss
64.

The ideal system of public Finance is one where the net benefit is

A. maximum
B. minimum
C. zero
D. infinity
Answer» A. maximum
discuss
65.

The principle of Maximum Social Advantage is connected with

A. taxation
B. expenditure
C. public debt
D. both (a) and (b)
Answer» B. expenditure
discuss
66.

Economic functions of the government are all the following EXCEPT to .

A. Control the price level of public goods.
B. Create a stable economic environment.
C. Increase the level of education.
D. Distribute income and wealth.
Answer» C. Increase the level of education.
discuss
67.

Which of the following does NOT determine the nature of Public Economics?

A. Public economics studies the government and how its policies affect the economy.
B. Public economics is the study of government policy through the lens of economic efficiency and equity.
C. Public economics builds on the theory of welfare economics and is ultimately used as a tool to improve social
D. Public Economics studies the behaviour of private firms and is called economics of Priavte Sector.
Answer» D. Public Economics studies the behaviour of private firms and is called economics of Priavte Sector.
discuss
68.

Which of the following describes the situation where all taxes and other revenues are less than expenditures during a given period?

A. Budget Deficit.
B. Budget Surplus.
C. Balanced Budget.
D. Public Debt.
Answer» A. Budget Deficit.
discuss
69.

The Fundamental Theorem of Welfare Economics:

A. Shows that the allocation of resources generated by a complete system of perfectly competitive markets results in all consumers attaining the same utility level.
B. Refers to the biblical observation that "the poor ye shall always have with you."
C. Implies that no intervention in the workings of markets can be justified on efficiency grounds.
D. Holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.
Answer» D. Holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.
discuss
70.

If the economy is in an inflationary period, what action would Fiscal Policy most likely take?

A. Decrease the discount rate.
B. Increase taxes.
C. Decrease taxes.
D. Increase spending.
Answer» B. Increase taxes.
discuss
71.

Public goods are difficult for a private market to provide due to:

A. The free-rider problem.
B. The Tragedy of the Commons.
C. The public goods problem.
D. The rivalness problem.
Answer» A. The free-rider problem.
discuss
72.

Merit goods are those which, when consumed, generate positive external benefits. This is likely to mean that, in a free market economy, the good will be:

A. Over-consumed.
B. Over-supplied.
C. Subject to VAT.
D. Under-supplied.
Answer» D. Under-supplied.
discuss
73.

The optimum level of economic activity and associated pollution from society's point of view occurs where:

A. Marginal private benefit = Marginal private cost.
B. Marginal social benefit < Marginal social cost.
C. Marginal social benefit = Marginal social cost.
D. Marginal social benefit > Marginal social cost.
Answer» C. Marginal social benefit = Marginal social cost.
discuss
74.

If pollution by one firm results in higher production costs for another firm, this would be classified as a:

A. Negative production externality.
B. Negative consumption externality.
C. Marginal private cost of production.
D. Free Good.
Answer» A. Negative production externality.
discuss
75.

In the case of a negative externality, the social marginal cost will:

A. Be equal to private marginal cost.
B. Exceed the private marginal cost
C. Fall short of private marginal cost.
D. Bear no significant relation to private marginal cost.
Answer» B. Exceed the private marginal cost
discuss
76.

Printing of new currency notes and RBI borrowings by government is called:

A. Government Loans.
B. Government Securities.
C. Government Bonds.
D. Deficit Financing.
Answer» D. Deficit Financing.
discuss
77.

Which of the following is not a characteristic of a tax?

A. It is a compulsory payment.
B. Every tax involves a sacrifice by tax payer.
C. There is a quid-pro-quo between the tax payer and the Government.
D. Refusal to pay tax is a punishable offence.
Answer» C. There is a quid-pro-quo between the tax payer and the Government.
discuss
78.

Which of the following is not the broad component of Property Rights?

A. The right to use the good.
B. The right not to transfer the good to others.
C. The right to earn income from the good.
D. The right to enforce property rights.
Answer» B. The right not to transfer the good to others.
discuss
79.

When property rights are settled by means of bargaining or negotiating terms, what has been applied?

A. A good deal.
B. A bad deal.
C. Cloud theorem.
D. Coase theorem.
Answer» D. Coase theorem.
discuss
80.

Following are some of examples of Transfer Expenditure EXCEPT:

A. Interest payments on public debt.
B. Social infrastructure such as education, health and family welfare.
C. Unemployment allowances.
D. Subsidies.
Answer» B. Social infrastructure such as education, health and family welfare.
discuss
81.

All other things being equal, a substantial cut in the rate of income tax in the short run is most likely to reduce:

A. The government budget deficit.
B. Spending on imports.
C. Unemployment.
D. Inflation.
Answer» C. Unemployment.
discuss
82.

Which of the following is NOT the effect of taxation on production?

A. Effects on the distribution of income and wealth.
B. Effects on the ability to work, save and invest.
C. Effects on the will to work, save and invest.
D. Effects on the allocation of resources.
Answer» A. Effects on the distribution of income and wealth.
discuss
83.

A tax either on consumers or on producers:

A. Creates a loss only to consumers.
B. Creates a loss only to producers.
C. Creates a net gain for the society as a whole.
D. Creates a dead weight loss for society as a whole.
Answer» D. Creates a dead weight loss for society as a whole.
discuss
84.

The direct violation of Tax law is called:

A. Tax Avoidance.
B. Tax Rebate.
C. Tax Evasion.
D. Tax Incidence.
Answer» C. Tax Evasion.
discuss
85.

In the case of relatively elastic demand, the money burden of tax is on:

A. Entirely on seller.
B. More on seller.
C. Entirely on buyer.
D. More on buyer.
Answer» B. More on seller.
discuss
86.

With increase in urbanisation and industrialisation, the role of Government started:

A. Increasing.
B. Declining.
C. Stagnant.
D. Unstable.
Answer» A. Increasing.
discuss
87.

Which of the following is NOT the subject matter of Public Finance?

A. Public Revenue & Expenditure.
B. Business administration.
C. Public Debt.
D. Fiscal Policy.
Answer» B. Business administration.
discuss
88.

The most important aim of fiscal policy in a developing country is:

A. Public Revenue.
B. Regional balance.
C. Economic stability.
D. Economic development.
Answer» D. Economic development.
discuss
89.

.If a good is a public good, then:

A. People who do not pay can be excluded from consuming the good.
B. Consumption is regulated.
C. People who do not pay cannot be excluded from consuming the good.
D. Consumption is deregulated.
Answer» C. People who do not pay cannot be excluded from consuming the good.
discuss
90.

A market failure can best be defined as a situation where:

A. Markets enable buyers to gain utility.
B. Markets fail to allocate resources efficiently.
C. Markets fail to enable sellers to make profits.
D. Markets encourage people to take risks.
Answer» B. Markets fail to allocate resources efficiently.
discuss
91.

The “Tragedy of the Commons” is:

A. Discovery of corruption among members of the Society.
B. Existence of Market Failure.
C. Exhaustion of resources that are collectively owned.
D. Outrageous crime in a Boston public park.
Answer» C. Exhaustion of resources that are collectively owned.
discuss
92.

A tax that takes away a higher proportion of one's income as the income rises is termed as a:

A. Progressive Tax.
B. Regressive Tax.
C. Proportional Tax.
D. Indirect Tax.
Answer» A. Progressive Tax.
discuss
93.

Loans taken by the government for purpose of war, earthquakes for covering budget deficit are:

A. Productive Debts.
B. Unproductive Debts.
C. Voluntary Debts
D. External Debts.
Answer» B. Unproductive Debts.
discuss
94.

The incidence of tax refers to:

A. The level and rate of taxation.
B. The growth of taxation.
C. The way in which tax is collected.
D. Who ultimately pays the tax.
Answer» D. Who ultimately pays the tax.
discuss
95.

In the case of direct tax, impact and incidence are on:

A. Same person.
B. Sellers.
C. Different person.
D. Producer.
Answer» A. Same person.
discuss

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