Economics Quiz: MCQ Hardest Trivia! Test
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Questions and Answers
- 1.
Which of the following pairs is a substitute?
- A.
Mobile phone and charger
- B.
Wool and cotton
- C.
Salt and pepper
- D.
Tea and sugar
Correct Answer
B. Wool and cottonExplanation
Wool and cotton are a substitute pair because they are both natural fibers that can be used to make clothing and textiles. They have similar properties and can be used interchangeably in many situations. Mobile phone and charger, salt and pepper, and tea and sugar are not substitutes as they serve different purposes and cannot be used interchangeably.Rate this question:
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- 2.
When a consumer has the ability and willingness to pay for a good, this is called
- A.
Want
- B.
Desire
- C.
Demand
- D.
Law of demand
Correct Answer
C. DemandExplanation
Demand refers to the consumer's ability and willingness to pay for a good or service. It is the quantity of a product or service that consumers are willing and able to purchase at a given price within a specific time period. In this context, demand signifies the consumer's desire for a product or service, coupled with their ability to afford it.Rate this question:
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- 3.
Sugar and honey are viewed as substitutes for each other in many recipes. If the price of sugar rises, what can be expected is the
- A.
Demand for honey to increase
- B.
Demand for honey to decrease
- C.
Quantity demanded for honey to increase
- D.
Quantity demanded for honey to decrease
Correct Answer
A. Demand for honey to increaseExplanation
When the price of sugar rises, it becomes more expensive for consumers to purchase sugar. As a result, they may choose to substitute sugar with honey in their recipes. This increase in the substitution of sugar with honey leads to an increase in the demand for honey. Therefore, the correct answer is that the demand for honey is expected to increase when the price of sugar rises.Rate this question:
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- 4.
Which of the following goods and services has the highest price elasticity of demand, based on the proportion of income spent on them?
- A.
A haircut
- B.
IPhone 7
- C.
Toothbrush
- D.
Curry powder
Correct Answer
B. IpHone 7Explanation
The correct answer is iPhone 7. Price elasticity of demand measures the responsiveness of demand to a change in price. Goods and services that have a higher proportion of income spent on them tend to have a higher price elasticity of demand. Since an iPhone 7 is a relatively expensive item compared to a haircut, toothbrush, or curry powder, it is likely to have a higher price elasticity of demand. This means that a small change in price is likely to have a larger impact on the demand for iPhone 7 compared to the other options.Rate this question:
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- 5.
Sellers would offer _______________ for sale as price decreases, and thus, the supply curve is ____________ sloping.
- A.
Less; upwards
- B.
More; upwards
- C.
Less; downwards
- D.
More; downwards
Correct Answer
A. Less; upwardsExplanation
As the price decreases, sellers would offer less of the product for sale, resulting in a decrease in the quantity supplied. This is because lower prices may not be profitable for sellers, so they reduce the amount they are willing to supply. Therefore, the supply curve is upward sloping, indicating that as the price decreases, the quantity supplied decreases.Rate this question:
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- 6.
If there is a shortage of a product, we can conclude that its price _______________________
- A.
Is below the equilibrium level
- B.
Is above the equilibrium level
- C.
Will fall in the near future
- D.
Is in equilibrium
Correct Answer
B. Is above the equilibrium levelExplanation
If there is a shortage of a product, it means that the demand for the product exceeds the available supply. This indicates that the price of the product is lower than the equilibrium level, as the quantity supplied is not enough to meet the quantity demanded. To restore equilibrium, the price of the product would need to increase, which implies that the price is currently below the equilibrium level. Therefore, the correct answer is that the price is above the equilibrium level.Rate this question:
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- 7.
If there is a shortage of 'Avtaar' movie tickets (assuming 'Avtaar' is a crowd - puller), we can predict that the _________________________
- A.
Price of the tickets will rise
- B.
Price of the tickets will decline
- C.
Quantity of the tickets sold and purchased are the same
- D.
Quantity supplied of the tickets exceeds the quantity demanded for Formula 1
Correct Answer
A. Price of the tickets will riseExplanation
If there is a shortage of 'Avtaar' movie tickets, it indicates that there is high demand for the tickets. In such a situation, the price of the tickets is likely to rise as sellers will try to take advantage of the scarcity and increase the price to maximize their profits. This is a common economic principle known as supply and demand, where limited supply and high demand lead to an increase in price.Rate this question:
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- 8.
Which of the following statements is the main difference between 'short-run' and 'long run'?
- A.
The law of diminishing marginal returns applies in the long run, not the short run
- B.
All resources are fixed in the short run, while all resources are variables in the long run
- C.
All resources are variables in the long run, while at least one resource is fixed in the short run
- D.
Fixed costs are more important to decision making in the long run than they are in the short run
Correct Answer
C. All resources are variables in the long run, while at least one resource is fixed in the short runExplanation
In the short run, at least one resource is fixed, meaning it cannot be easily changed or adjusted. This limitation on resources restricts the ability to make significant changes or adjustments to production levels. On the other hand, in the long run, all resources are variable, meaning they can be adjusted or changed as needed. This flexibility in resource allocation allows for more freedom in decision making and the ability to make significant changes to production levels. This main difference between the short run and the long run is crucial in understanding the impact on decision making and production planning.Rate this question:
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- 9.
An isoquant curve reflects
- A.
All the possible combinations of two inputs that give the same level of output
- B.
All the possible combinations of two inputs that give different levels of output
- C.
All the possible combinations of two products, where a producer is indifferent because it gives the same profit
- D.
None of the above
Correct Answer
A. All the possible combinations of two inputs that give the same level of outputExplanation
An isoquant curve reflects all the possible combinations of two inputs that give the same level of output. This means that any point on the isoquant curve represents a specific combination of inputs that will result in the same level of output. The curve allows producers to visualize and analyze different input combinations that will yield the desired output level. It helps in determining the optimal input mix and understanding the relationship between inputs and output in production.Rate this question:
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- 10.
Suppose a firm increased its input by 10%, while its output increased by 15%. The firm is experiencing
- A.
Decreasing returns to scale
- B.
Increasing returns to scale
- C.
Constant returns to scale
- D.
Diminishing returns
Correct Answer
B. Increasing returns to scaleExplanation
When a firm's input increases by a certain percentage and its output increases by a higher percentage, it indicates increasing returns to scale. In this case, the firm's input increased by 10% but its output increased by 15%, which means that the firm is able to achieve greater output with relatively less input. This suggests that the firm is experiencing increasing returns to scale, where the increase in input leads to a proportionally larger increase in output.Rate this question:
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- 11.
If the units of a variable factor are increased on a fixed factor, after a point, the marginal product of the variable factor _______________________
- A.
Increases
- B.
Diminishes
- C.
Remains constant
- D.
None of the above
Correct Answer
B. DiminishesExplanation
When the units of a variable factor are increased on a fixed factor, the marginal product of the variable factor initially increases due to the principle of diminishing marginal returns. However, after a certain point, the additional units of the variable factor become less productive, causing the marginal product to diminish. This occurs because the fixed factor, such as machinery or space, becomes a limiting factor in the production process, leading to diminishing returns and a decrease in the marginal product of the variable factor.Rate this question:
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- 12.
An example of implicit cost for a firm is the
- A.
Forgone payment in terms of salaries and wages to the owners of the firm
- B.
Payment of salaries and wages to workers by the firm
- C.
Payment for resources used in production by the firm
- D.
None of the above
Correct Answer
A. Forgone payment in terms of salaries and wages to the owners of the firmExplanation
Implicit costs are the opportunity costs that arise from using resources in a particular way. In this case, the forgone payment in terms of salaries and wages to the owners of the firm represents an implicit cost because it is the income that the owners could have earned if they had chosen to work for another firm instead of their own. This cost is not directly visible or accounted for in the firm's financial statements, but it is still a real cost that should be considered when evaluating the profitability of the firm.Rate this question:
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- 13.
If a firm decides to produce no output in the short run, which of the following costs will be zero?
- A.
Its total cost
- B.
Its fixed cost
- C.
Its average cost
- D.
Its variable cost
Correct Answer
D. Its variable costExplanation
If a firm decides to produce no output in the short run, its variable cost will be zero. Variable costs are costs that vary with the level of production, such as raw materials or labor. Since no output is being produced, there is no need for these variable costs, resulting in a cost of zero. However, fixed costs, which do not vary with the level of production, such as rent or insurance, will still need to be paid even if no output is being produced. Total cost is the sum of both fixed and variable costs, so it will also not be zero. Average cost is the total cost divided by the quantity of output, so it will also not be zero.Rate this question:
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- 14.
In the short run, a firm that produces 100 units of output has an average total cost of INR 200 and the average variable cost of INR 150. The firm's total fixed cost is
- A.
INR 5,000
- B.
INR 50
- C.
INR 500
- D.
INR 0.50
Correct Answer
A. INR 5,000 -
- 15.
Which of the following incomes received by factors of production is incorrect?
- A.
Rents paid for land
- B.
Profits paid for capital
- C.
Wages paid for labor
- D.
Dividends paid for capital
Correct Answer
B. Profits paid for capitalExplanation
The correct answer is "Profits paid for capital." This is because profits are not considered an income received by factors of production. Profits are the residual income left after deducting all expenses, including wages and rents, from the total revenue. Factors of production, such as land, labor, and capital, receive incomes in the form of rents, wages, and dividends respectively, but not profits.Rate this question:
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- 16.
The circular flow of economic activity is a model of the ____________________
- A.
Flow of goods, resources, payments and expenditures among various sectors in the economy
- B.
Influences of the government on business behaviour
- C.
Role of unions and the government on the economy
- D.
Influences of business on commerce
Correct Answer
A. Flow of goods, resources, payments and expenditures among various sectors in the economyExplanation
The circular flow of economic activity is a model that illustrates how goods, resources, payments, and expenditures circulate among different sectors in the economy. It shows how households provide resources (such as labor) to businesses, and in return, businesses produce goods and services that are purchased by households. This model also demonstrates how businesses pay wages and salaries to households, who in turn use that income to purchase goods and services. Additionally, it highlights the flow of payments between businesses and other sectors, such as the government and foreign entities.Rate this question:
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- 17.
Government policies regarding taxes and expenditures are called ________________
- A.
Fiscal policies
- B.
Growth policies
- C.
Monetary policies
- D.
Supply side policies
Correct Answer
A. Fiscal policiesExplanation
Fiscal policies refer to the government's decisions regarding taxation and spending. These policies are used to influence the overall economy by managing the levels of aggregate demand and controlling inflation. By adjusting tax rates and government spending, fiscal policies aim to stabilize the economy, promote economic growth, and address issues such as unemployment and inflation.Rate this question:
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- 18.
The branch of economics that examines the functioning of individual industries and the behaviour of individual decision -making units is
- A.
Microeconomics
- B.
Macroeconomics
- C.
Positive economics
- D.
Normative economics
Correct Answer
A. MicroeconomicsExplanation
Microeconomics is the branch of economics that focuses on the study of individual industries and the behavior of individual decision-making units, such as households and firms. It analyzes how these units make decisions regarding the allocation of limited resources and how their choices impact the overall market. Microeconomics helps in understanding the supply and demand dynamics, price determination, market structures, and individual consumer and producer behavior.Rate this question:
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- 19.
It is necessary to add ___________________________ to convert GNP at factor cost to GNP at market price
- A.
Expenditure on imports
- B.
Gross trading profits of companies
- C.
Indirect taxes and subtract subsidies
- D.
Exports
Correct Answer
C. Indirect taxes and subtract subsidiesExplanation
To convert GNP at factor cost to GNP at market price, it is necessary to add indirect taxes and subtract subsidies. This is because indirect taxes increase the market price of goods and services, so they need to be added to factor cost to reflect the full market value. Conversely, subsidies decrease the market price, so they need to be subtracted to accurately calculate GNP at market price. Including expenditure on imports, gross trading profits of companies, or exports is not necessary for this conversion.Rate this question:
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- 20.
Which is considered as the Base Year for calculating GDP at of India?
- A.
2000- 01
- B.
2011 - 12
- C.
2016-17
- D.
None of the above
Correct Answer
B. 2011 - 12Explanation
The base year for calculating GDP in India is 2011-12. This means that the economic data and statistics are measured and compared to the economic conditions of that particular year. The choice of base year is important as it provides a reference point for measuring economic growth and changes in the economy over time. The base year is usually selected based on its representativeness of the overall economy and availability of reliable data.Rate this question:
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- 21.
Depreciation is subtracted from GDP to arrive at NDP
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Depreciation is subtracted from GDP to arrive at NDP because depreciation refers to the decrease in the value of fixed assets over time due to wear and tear, obsolescence, or other factors. Since GDP includes the total value of goods and services produced within a country's borders, it does not account for the loss in value of fixed assets. By subtracting depreciation from GDP, we can calculate Net Domestic Product (NDP), which represents the value of goods and services produced after accounting for the wear and tear on fixed assets.Rate this question:
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- 22.
The aviation industry is an example of Oligopoly.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
The aviation industry is an example of an oligopoly because it is dominated by a few large airlines that have significant control over the market. These airlines have the power to influence prices, set standards, and make decisions that affect the entire industry. Additionally, barriers to entry, such as high capital requirements and government regulations, make it difficult for new competitors to enter the market. This concentration of power and limited competition are key characteristics of an oligopoly market structure.Rate this question:
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- 23.
A Break-even point occurs when a firm earns huge profits.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because a break-even point occurs when a firm's total revenue equals its total costs, resulting in zero profits. It is the point at which a company neither makes a profit nor incurs a loss. Therefore, it does not indicate that a firm earns huge profits.Rate this question:
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- 24.
What is the color of the moon?
- A.
White
- B.
Red
- C.
Pink
- D.
Orange.
Correct Answer
A. WhiteExplanation
The moon appears white in color. This is because it reflects the sunlight that falls on it, and since sunlight is composed of all colors, the reflected light appears white to our eyes. Additionally, the moon's surface is covered in a layer of dust and rocks, which also contribute to its white appearance.Rate this question:
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- 25.
Business Cycles of any country can be prevented by its Finance Minister.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Business cycles are a natural part of any economy and cannot be completely prevented by any individual, including the Finance Minister. Business cycles refer to the fluctuations in economic activity, including periods of expansion and contraction. These cycles are influenced by various factors such as consumer spending, investment, government policies, and global economic conditions. While the Finance Minister can implement policies to mitigate the impact of business cycles and promote stability, they cannot completely prevent them from occurring. Therefore, the statement that the Finance Minister can prevent business cycles is false.Rate this question:
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- 26.
Price elasticity (of demand) for salt is greater than price elasticity (of demand) for diamonds.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because price elasticity of demand measures the responsiveness of quantity demanded to a change in price. Salt is a necessity and has a relatively inelastic demand, meaning that even if the price increases, the quantity demanded will not decrease significantly. On the other hand, diamonds are a luxury and have a relatively elastic demand, meaning that even a small change in price can greatly affect the quantity demanded. Therefore, price elasticity of demand for diamonds is greater than for salt.Rate this question:
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- 27.
Depression necessarily comes before recession in a business cycle.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is false because depression does not necessarily come before a recession in a business cycle. A recession is a period of economic decline characterized by a significant decline in economic activity, while a depression is a severe and prolonged recession. While a depression can occur after a recession, it is not a necessary outcome. In fact, not all recessions lead to a depression, as governments and central banks often take measures to prevent the economy from entering into a depression.Rate this question:
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- 28.
The Central Bank of India is known as the Federal Bank.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The Central Bank of India is not known as the Federal Bank. The Central Bank of India is the Reserve Bank of India, which is the country's central banking institution. The Federal Bank, on the other hand, is a commercial bank in India. Therefore, the statement is false.Rate this question:
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- 29.
Opportunity cost is an addition of implicit and explicit costs when the next best alternative is considered.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
Opportunity cost refers to the value of the next best alternative that is foregone when making a decision. It takes into account both implicit costs, which are the opportunity costs of using resources that have alternative uses, and explicit costs, which are the actual monetary costs incurred. Therefore, the statement that opportunity cost is an addition of implicit and explicit costs when the next best alternative is considered is true.Rate this question:
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- 30.
Fixed costs undergo changes as production expands.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Fixed costs do not undergo changes as production expands. Fixed costs are costs that do not vary with the level of production, such as rent, insurance, or salaries. These costs remain constant regardless of the volume of output. Therefore, the statement is false.Rate this question:
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Mar 22, 2023Quiz Edited by
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Nov 29, 2017Quiz Created by
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