Central Problems of an Economy Multiple Choice Questions
1. One thing common among the USA, the UK, UAE and Japan is that
A. Only rich people live in these countries, there is no poverty.
B. Only while people inhabit these countries.
C. People over there have to seek solutions to varied economic problems.
D. They are growing at very fast rates, about 8 to 10% per annum.
Answer: C
2. The shape of transformation curve is changed due to
A. Opportunity cost
B. Total cost
C. Marginal opportunity cost
D. None
Answer: C
3. The concept of scarcity of resources
A. Implies that consumers want will be satisfied
B. Applies only to the less developed countries.
C. Does not apply to developed countries.
D. consumer’s wants will never be completely satisfied.
Answer: D
4. Scarcity and choice are inseparable:
A. Only at consumer’s level to maximize his satisfaction
B. Only at producer’s level to maximize his profits
C. Only at national level to maximize social welfare
D. At all levels of decision making.
Answer: D
5. Opportunity cost of an activity is:
A. Cost of foregone opportunity
B. Cost of units sacrificed
C. Value of next best alternative sacrificed
D. None of these
Answer: C
6. The opportunity cost of a new public stadium is the:
A. Money cost of hiring guards and staff for the new stadium.
B. Cost of constructing the new stadium in a future year.
C. Change in the real estate tax rate to pay off the new stadium.
D. Other goods and services that must be sacrificed to construct the new stadium.
Answer: D
7. PP cure:
A. Slopes upward
B. Slopes downward and is concave
C. Slopes downward and is convex
D. Slopes downward making a straight line
Answer: B
8. The opportunity cost of 500 kg of wheat produced on a land which can produce 400 kg of rice is:
A. 100 kg of rice
B. 400 kg of rice
C. 600 kg rice
D. None of these
Answer: B
9. Which of the following is a statement of normative nature in economics?
A. Economics is study of choice alternatives
B. Govt. should be concerned with how to reduce unemployment.
C. According to an estimate, more than 10% of houses in Indian cities are lying vacant.
D. Accommodation of refugees is posing a big problem for the Europe
Answer: B
10. Two production possibilities curve can intersect each other when
A. Production conditions turn favourable for production of both goods.
B. Production conditions turn unfavourable for production of both goods.
C. Production conditions turn favourable for production of one commodity and unfavourable for the other
D. None of these.
Answer: C
11. Which of the following statements is correct?
A. An economy always operates on PPC.
B. Only scarce goods command price.
C. Economics which deals with the problem of allocation of resources is known as macroeconomics.
D. PP curve is concave shaped because of decreasing marginal opportunity cost.
Answer: B
12. The PP curve is based on the assumption that –
A. The given resources are fully and efficiently utilized
B. The state of technology does not change
C. The resources are not equally efficient in production of all goods.
D. All the above.
Answer: D
13. Study of macroeconomics is concerned with:
A. Theory of demand
B. Determination of aggregate output
C. General price level
D. Both B. and (c)
Answer: D
14. Which of the following is related to the problem ‘for whom to produce’?
A. Factor distribution of income
B. Inter-personal distribution of income
C. Both A. and (b)
D. None of these
Answer: C
15. Macroeconomics deals with
A. The behaviour of firms
B. The behaviour of electronics industry
C. The activities of individual units
D. Economic aggregates
Answer: D
16. Total output of an economy is the sum of total output of individual producers. This statement proves that:
A. Macroeconomics depends on micro economics
B. There is no correlation between micro and macro economics
C. Study of micro and macro economics is independent of each other
D. Microeconomics is dependent on macroeconomics
17. The opportunity cost of watching a movie will be equal to:
A. The time lost while watching the show
B. The pleasure that could have been enjoyed watching TV instead
C. The pleasure enjoyed by watching the show
D. The amount paid to buy the tickets.
Answer: B
18. Assume that a PPF for butter and guns is drawn so that it is a straight line. It means
A. Less and less units of butter are sacrificed to gain an additional unit of gun.
B. More and more units of butter are sacrificed to gain an additional unit of gun.
C. Same units of butter are sacrificed to gain an additional unit of gun.
D. None of these.
Answer: C
19. The word ‘Economics’ is most closely connected with the world:
A. Free
B. Scarcity
C. Unlimited
D. Restricted
Answer: B
20. Which of the following will not lead to shift in PPF?
A. Upgradation of Technology
B. Exploration of new oil reserves
C. Massive unemployment
D. Destruction of Resources
Answer: C
21. Which of the following is related to Microeconomics?
A. Inflation in the economy
B. Unemployment Problem
C. National income
D. Income from Postal department
Answer: D
22. Opportunity Costs arise:
A. When there is only course of action
B. When there are two or more alternative courses of action
C. Both A. and (b)
D. Neither A. nor (b)
Answer: B
23. Slope of production possibility curve is :
A. a straight line
B. convex to the point of origin
C. concave to the point of origin
D. none of these
Answer: C
24. The reason behind an outward shift of a PPC could be : (Choose the correct alternative)
A. growth of resources
B. technological advancement
C. either A. or B. or both
D. obsolete technology
Answer: C
25. A country has 2 alternative of production of production as 50X+ 100Y or 54X+98Y from the given resource available. If the country chooses the second alternative. What is the marginal opportunity cost of producing X :
A. 3Y
B. 4X
C. 2Y
D. 6Y
Answer: C
26. Which of the following is a normative statement ?
A. Planned economies allocate resources via government departments.
B. Most transititonal economies have experienced problems of falling output and rising prices
C. There is a greater degree of consumer sovereignty in market economies than planned economies.
D. Reducing inequality should be a major priority for mixed economies.
Answer: D
27. Normative economics is based on (Choose the correct alternative).
A. ethical consideration
B. fact and generalisation
C. what is or what should be
D. All of these
Answer: D
28. An example of positive economic analysis would be :
A. An analysis of the relationship between the price of food and the quantity purchased.
B. Determining how much income each person should be granted.
C. Determining the fair price for food
D. Deciding how to distribute the output of the company.
Answer: A
29. Efficient use of resources in production is known as ………… ?
A. Growth of Resources
B. Allocation of Resources
C. Economising Resources
D. Any of these
Answer: C
30. Problem of ‘What to Produce’ is related to ………….. ?
A. Growth of resources
B. Allocation of resources
C. Scarcity of resources
D. Any of these
Answer: B
31. A statement which does not offer any suggestion is known as :
A. positive statement
B. normative statement
C. both A. and (b)
D. none of these.
Answer: A
32. The government does not interfere in the process of decision-making under :
A. market economy
B. centrally planned economy
C. mixed economy
D. all of these
Answer: A
33. Consumer is sovereign under :
A. controlled economy
B. free economy
C. mixed economy
D. both B. and (c)
Answer: D
34. Ques.like what should be the level of National income, what should the wage rate; fall within the scope of
A. Positive science
B. Normative science
C. Both a and b
D. None of the above
Answer: B
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