MCQs

1.         Welfare Economics is the study of

a.       The well-being of less fortunate people.

b.      Welfare programmes in India

c.       The effect of income redistribution on work efforts.

d.      How the allocation of resources affects economic well-being.

2.         The study of how the allocation of resources affects economic well-being is called

a.       Consumer economics

b.      Macroeconomics

c.       Welfare economics

d.      Supply-side economics

3.         Positive analysis refers to what

a.       is

b.      should be

c.       could be

d.      is politically correct

4.         Normative economics refers to what

a.       is

b.      should be

c.       maximizes efficiency

d.      is politically correct

5.         The equilibrium of supply and demand in a market

a.       Maximizes the profits of producers

b.      Can only be achieved with government intervention.

c.       Produces both an efficient and equitable market outcome

d.      Maximizes the total benefits received by buyers and sellers     

6.         Normally a demand curve will have the shape

a.       Horizontal      b.   vertical   c.    Downward sloping    d.  Upward sloping

7.         Law of demand show relation between

a.       Income and Price of a commodity

b.      Price and quantity of a commodity

c.        Income and quantity  demanded

d.      Quantity demanded and quantity supplied

8.         This is an assumption of law of Demand

a.       Price should not change

b.      Quantity should not change

c.       Supply should not change

d.      Income of consumer should not change

9.         If quantity demanded is completely unresponsive to changes in price, demand is

a.       Inelastic

b.      Elastic

c.       Unit elastic

d.      Perfectly inelastic

10.       “Ceteris Paribus” If a good has more substitutes its price elasticity of demand is

a.       Larger

b.      Smaller

c.       Zero

d.      unity

11.       Price of a product falls by 10% and its demand rises by 30% the elasticity of demand is

a.       10%       b.     30 %         c.        3         d. 0.33

12.       If elasticity of demand is very low it shows that the commodity is

a.         A  necessity

b.       A luxury

c.       Has little importance in budget

d.      A  and  C  above     

13.       The following is not a cause of shift in demand

a.         Change in income

b.        Change in price

c.        Change in fashion

d.       Change in the price of substitutes.

14. When demand is perfectly inelastic in increase in price will result in

a.       A decrease in total revenue

b.      An increase in total revenue

c.       No change in total revenue

d.      A decrease in quantity demanded

15. If demand is unitary elastic, a 25% increase in price will result in

a.       25% change in total revenue

b.      No change in quantity demanded

c.       1% decrease in quantity demanded

d.      25% decrease in quantity demanded.

16. Irrespective of price, Sofia always spends Rs. 100 a week on ice cream, we conclude that:

a.       Elasticity of demand is zero

b.      Elasticity of demand is one

c.       Elasticity of demand is infinity

d.      The law of demand has been violated

17. When cross elasticity of demand is a large positive number, one can conclude that:

a.       The good is normal

b.      The good is inferior

c.       The good is a substitute

d.      The good is a complement

18. Which one is the assumption of law of demand?

a.       Price of the commodity should not change

b.      Quantity demanded should not change

c.       Prices of substitutes should not change

d.      Demand curve must be linear

19. Price and demand are positively correlated in case of:

a.       Necessities

b.      Comforts

c.       Giffen good

d.      Luxuries

20. The elasticity of demand of durable goods is:

a.       Less than unity

b.      Greater than unity

c.       Equal to unity

d.      Zero