📗Basic concept of Economics, Demand and Supply (Paper-C4)-100 MCQ

📗Basic concept of Economics, Demand and Supply (Paper-C4)-100 MCQ  

1. Which of the following best defines scarcity?
A. Unlimited wants with limited resources
B. Limited wants with unlimited resources
C. Unlimited resources
D. No wants
Answer: A

2. Opportunity cost is:
A. Total cost of production
B. Cost of next best alternative foregone
C. Accounting cost
D. Fixed cost
Answer: B

3. Marginal utility refers to:
A. Total satisfaction
B. Additional satisfaction from one more unit
C. Average satisfaction
D. Minimum satisfaction
Answer: B

4. Law of diminishing marginal utility implies:
A. Utility increases constantly
B. Utility decreases after a point
C. Utility is constant
D. Utility becomes negative always
Answer: B

5. Demand is defined as:
A. Desire backed by willingness and ability to pay
B. Desire only
C. Need only
D. Supply of goods
Answer: A

6. Law of demand states:
A. Price and demand move together
B. Price and demand move inversely
C. No relation
D. Demand depends only on income
Answer: B

7. Giffen goods violate:
A. Law of supply
B. Law of demand
C. Law of diminishing returns
D. Law of utility
Answer: B

8. Inferior goods have:
A. Positive income effect
B. Negative income effect
C. No income effect
D. Infinite elasticity
Answer: B

9. Substitute goods have:
A. Positive cross elasticity
B. Negative cross elasticity
C. Zero elasticity
D. Infinite elasticity
Answer: A

10. Complementary goods have:
A. Positive cross elasticity
B. Negative cross elasticity
C. Zero cross elasticity
D. Infinite elasticity
Answer: B

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11. Price elasticity of demand is:
A. Ratio of price to demand
B. Ratio of % change in demand to % change in price
C. Ratio of income to demand
D. Ratio of supply to demand
Answer: B

12. Perfectly inelastic demand has elasticity:
A. 0
B. 1
C. ∞
D. -1
Answer: A

13. Perfectly elastic demand has elasticity:
A. 0
B. 1
C. ∞
D. -1
Answer: C

14. Unitary elastic demand means elasticity is:
A. 0
B. 1
C. >1
D. <1
Answer: B

15. Demand curve slopes downward due to:
A. Law of supply
B. Income effect & substitution effect
C. Production cost
D. Government policy
Answer: B

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16. Change in demand vs change in quantity demanded differs due to:
A. Price change only
B. Non-price factors
C. Supply changes
D. Taxation
Answer: B

17. Increase in demand shifts curve:
A. Left
B. Right
C. Up
D. Down
Answer: B

18. Contraction of demand occurs due to:
A. Increase in income
B. Increase in price
C. Decrease in price
D. Change in taste
Answer: B

19. Supply means:
A. Desire to sell
B. Quantity seller is willing and able to sell
C. Stock available
D. Production capacity
Answer: B

20. Law of supply states:
A. Inverse relation
B. Direct relation
C. No relation
D. Random relation
Answer: B

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21. Supply curve slopes upward due to:
A. Law of diminishing returns
B. Law of increasing returns
C. Consumer behavior
D. Government policy
Answer: A

22. Change in supply is caused by:
A. Price of commodity
B. Technology
C. Quantity demanded
D. Demand curve
Answer: B

23. Increase in supply shifts curve:
A. Left
B. Right
C. Up
D. Down
Answer: B

24. Market equilibrium occurs when:
A. Demand > Supply
B. Supply > Demand
C. Demand = Supply
D. Demand is zero
Answer: C

25. Excess demand leads to:
A. Price fall
B. Price rise
C. No change
D. Supply decrease
Answer: B

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26. Excess supply leads to:
A. Price rise
B. Price fall
C. No change
D. Demand rise
Answer: B

27. Price ceiling causes:
A. Surplus
B. Shortage
C. Equilibrium
D. Inflation
Answer: B

28. Price floor causes:
A. Shortage
B. Surplus
C. No effect
D. Equilibrium
Answer: B

29. Elasticity depends on:
A. Nature of goods
B. Income
C. Time period
D. All of the above
Answer: D

30. Luxury goods have:
A. Elastic demand
B. Inelastic demand
C. Zero elasticity
D. Negative elasticity
Answer: A

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31. Necessities have:
A. Elastic demand
B. Inelastic demand
C. Infinite demand
D. Zero demand
Answer: B

32. Cross elasticity measures:
A. Income effect
B. Relationship between two goods
C. Supply changes
D. Price control
Answer: B

33. Income elasticity measures:
A. Price vs demand
B. Income vs demand
C. Supply vs income
D. Demand vs supply
Answer: B

34. If income rises and demand falls, good is:
A. Normal
B. Inferior
C. Luxury
D. Substitute
Answer: B

35. Total utility is:
A. Sum of marginal utilities
B. Average utility
C. Minimum utility
D. Fixed utility
Answer: A

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36. Marginal utility becomes zero when:
A. Total utility maximum
B. Total utility minimum
C. Total utility constant
D. Total utility decreasing
Answer: A

37. Indifference curve is:
A. Convex to origin
B. Concave
C. Straight line
D. Horizontal
Answer: A

38. Budget line shows:
A. Preferences
B. Income constraint
C. Utility
D. Demand
Answer: B

39. Consumer equilibrium occurs when:
A. MUx = MUy
B. MUx/Px = MUy/Py
C. Px = Py
D. Income = price
Answer: B

40. Production possibility curve shows:
A. Demand
B. Supply
C. Trade-offs
D. Utility
Answer: C

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41. PPC is concave due to:
A. Constant cost
B. Increasing opportunity cost
C. Decreasing cost
D. Zero cost
Answer: B

42. Microeconomics deals with:
A. Entire economy
B. Individual units
C. National income
D. Inflation
Answer: B

43. Macroeconomics deals with:
A. Individual firms
B. Aggregate economy
C. Utility
D. Demand only
Answer: B

44. Normal goods have:
A. Negative income elasticity
B. Positive income elasticity
C. Zero elasticity
D. Infinite elasticity
Answer: B

45. If demand is perfectly elastic, demand curve is:
A. Vertical
B. Horizontal
C. Upward
D. Downward
Answer: B

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46. If demand is perfectly inelastic, curve is:
A. Horizontal
B. Vertical
C. Downward
D. Upward
Answer: B

47. Short run supply is influenced by:
A. Fixed factors
B. Variable factors
C. Technology
D. Government policy
Answer: A

48. Long run supply allows:
A. Fixed inputs
B. All inputs variable
C. No production
D. Only labor
Answer: B

49. Law of diminishing returns applies to:
A. Short run
B. Long run
C. Demand
D. Utility
Answer: A

50. Marginal cost is:
A. Total cost
B. Additional cost of one unit
C. Fixed cost
D. Average cost
Answer: B

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51. Average cost is:
A. TC/Q
B. MC/Q
C. FC/Q
D. VC/Q
Answer: A

52. Fixed cost remains:
A. Variable
B. Constant
C. Increasing
D. Decreasing
Answer: B

53. Variable cost changes with:
A. Output
B. Time
C. Government
D. Price
Answer: A

54. Market demand is:
A. Individual demand
B. Sum of individual demands
C. Supply
D. Utility
Answer: B

55. Market supply is:
A. Individual supply
B. Sum of supplies
C. Demand
D. Price
Answer: B

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56. Law of supply holds true under:
A. Ceteris paribus
B. Perfect competition
C. Monopoly
D. Oligopoly
Answer: A

57. Ceteris paribus means:
A. All variables change
B. Other things constant
C. Price fixed
D. Demand fixed
Answer: B

58. Demand schedule shows:
A. Income vs demand
B. Price vs quantity
C. Supply vs demand
D. Utility vs price
Answer: B

59. Supply schedule shows:
A. Price vs quantity supplied
B. Income vs supply
C. Demand vs price
D. Utility vs supply
Answer: A

60. Elasticity >1 means:
A. Inelastic
B. Elastic
C. Unitary
D. Perfect
Answer: B

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61. Elasticity <1 means:
A. Elastic
B. Inelastic
C. Perfect
D. Unitary
Answer: B

62. Price effect combines:
A. Income & substitution effects
B. Demand & supply
C. Utility & cost
D. None
Answer: A

63. Substitution effect arises due to:
A. Income change
B. Relative price change
C. Utility change
D. Supply change
Answer: B

64. Income effect arises due to:
A. Price change
B. Purchasing power change
C. Demand change
D. Supply change
Answer: B

65. Veblen goods exhibit:
A. Normal demand
B. Higher demand at higher price
C. Lower demand at higher price
D. Constant demand
Answer: B

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66. Derived demand refers to:
A. Consumer goods
B. Demand for inputs
C. Luxury goods
D. Inferior goods
Answer: B

67. Composite demand refers to:
A. Single use
B. Multiple uses
C. Luxury use
D. Inferior use
Answer: B

68. Joint demand refers to:
A. Substitute goods
B. Complementary goods
C. Inferior goods
D. Luxury goods
Answer: B

69. Expansion of demand occurs due to:
A. Price fall
B. Income rise
C. Taste change
D. Supply increase
Answer: A

70. Increase in supply due to better technology shifts curve:
A. Left
B. Right
C. Up
D. Down
Answer: B

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71. Contraction of supply occurs due to:
A. Price rise
B. Price fall
C. Technology
D. Tax
Answer: B

72. Indirect tax increases:
A. Supply
B. Cost
C. Demand
D. Utility
Answer: B

73. Subsidy shifts supply curve:
A. Left
B. Right
C. Up
D. Down
Answer: B

74. Equilibrium price is determined by:
A. Demand only
B. Supply only
C. Interaction of demand & supply
D. Government only
Answer: C

75. If demand increases and supply constant, price:
A. Falls
B. Rises
C. Constant
D. Zero
Answer: B

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76. If supply increases and demand constant, price:
A. Rises
B. Falls
C. Constant
D. Infinite
Answer: B

77. Elastic supply means:
A. Quantity responds strongly
B. Quantity fixed
C. No change
D. Negative change
Answer: A

78. Perfectly inelastic supply curve is:
A. Horizontal
B. Vertical
C. Downward
D. Upward
Answer: B

79. Perfectly elastic supply curve is:
A. Vertical
B. Horizontal
C. Downward
D. Upward
Answer: B

80. Time period affects:
A. Demand
B. Supply elasticity
C. Utility
D. Income
Answer: B

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81. Short run supply is:
A. More elastic
B. Less elastic
C. Perfect
D. Zero
Answer: B

82. Long run supply is:
A. Less elastic
B. More elastic
C. Zero
D. Negative
Answer: B

83. Scarcity leads to:
A. Choice
B. No choice
C. Free goods
D. Abundance
Answer: A

84. Free goods have:
A. Price
B. No price
C. High demand
D. Limited supply
Answer: B

85. Economic goods are:
A. Free
B. Scarce
C. Unlimited
D. Zero cost
Answer: B

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86. Utility is:
A. Satisfaction
B. Cost
C. Revenue
D. Profit
Answer: A

87. Cardinal utility measures utility in:
A. Numbers
B. Rankings
C. Graphs
D. Ratios
Answer: A

88. Ordinal utility measures:
A. Exact numbers
B. Order of preference
C. Cost
D. Supply
Answer: B

89. Indifference curve never:
A. Intersects
B. Slopes downward
C. Convex
D. Shows utility
Answer: A

90. Higher indifference curve shows:
A. Lower satisfaction
B. Higher satisfaction
C. Same satisfaction
D. No satisfaction
Answer: B

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91. Budget line slope is:
A. Px/Py
B. Py/Px
C. Income/Px
D. Income/Py
Answer: A

92. Consumer surplus is:
A. Price paid
B. Utility received minus price
C. Cost
D. Revenue
Answer: B

93. Producer surplus is:
A. Cost minus price
B. Price minus cost
C. Demand
D. Utility
Answer: B

94. Market failure occurs when:
A. Efficient allocation
B. Inefficient allocation
C. High demand
D. High supply
Answer: B

95. Invisible hand concept by:
A. Keynes
B. Adam Smith
C. Marshall
D. Ricardo
Answer: B

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96. Elasticity depends on time because:
A. Preferences change
B. Adjustment possible
C. Income changes
D. Supply fixed
Answer: B

97. Demand curve becomes flatter when:
A. Elastic demand
B. Inelastic demand
C. Zero demand
D. Perfect demand
Answer: A

98. Steep demand curve indicates:
A. Elastic
B. Inelastic
C. Perfect
D. Unitary
Answer: B

99. If price elasticity = 0.5, demand is:
A. Elastic
B. Inelastic
C. Unitary
D. Perfect
Answer: B

100. Central problem of economy arises due to:
A. Abundance
B. Scarcity
C. Equality
D. Inflation
Answer: B