Introduction to Economics MCQs | ECO401 MCQs | Set 2
Introduction to Economics MCQs | ECO401 MCQs | Set 2
MCQs (Multiple Choice Questions)
1) Ali is running a surgical business and provides surgical tools to the local hospitals. For his company, surgical tools fail in the category of______.
a) Entrepreneurship
b) Capital
c) Money
d) Labor
Correct Answer:
The correct answer is 'd'.
Explanation:
Surgical tools are physical products or assets, not directly related to labor, capital, or money. They're a part of the company's inventory or product line and are not a component of labor, which involves human effort or work, capital (financial assets, equipment, etc.), or money (currency used for transactions).
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2) Our economy is characterized by:
a) No energy resources
b) Unlimited material resources
c) Unlimited wants and needs
d) Abundant productive labor
Correct Answer:
The correct answer is 'c'.
Explanation:
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3) If P = 20 and Q = 50 then TR will be:
b) 1000
c) 70
d) 30
Correct Answer:
The correct answer is 'b'.
Explanation:
Total Revenue (TR) is calculated by multiplying the Price (P) by the Quantity (Q).
Given:
P (Price) = 20
Q (Quantity) = 50
TR = P * Q
= 20 * 50
= 1000
So, the Total Revenue (TR) when P = 20 and Q = 50 is 1000, which corresponds to option b) 1000.
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4) All the insurance companies around the globe work under the principle of:
a) Law of large numbers
b) Law of zero numbers
c) Law of small numbers
d) Law of constant numbers
Correct Answer:
The correct answer is 'a'.
Explanation:
This principle is fundamental to insurance. It states that as the number of similar exposure units (such as insured individuals or properties) increases, the more predictable and reliable the actual loss experience will be in relation to the expected loss experience. This law allows insurance companies to more accurately predict and spread risk, making insurance more feasible and statistically sound.
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5) According to the utility model of consumer demand, the law of diminishing marginal utility indicates that the demand curve is:
a) Vertical.
b) U-shaped.
c) Upward-sloping.
d) Downward-sloping.
Correct Answer:
The correct answer is 'd'.
Explanation:
The law of diminishing marginal utility asserts that as a consumer acquires more units of a specific product, the additional satisfaction or utility gained from each additional unit diminishes. This principle supports the downward-sloping demand curve commonly observed in economics, where as the price decreases, the quantity demanded increases.
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6) A total cost curve:
a) Relates output
b) Is always upward sloping
c) Get steeper as output rises, due to diminishing marginal product of an input
d) All of the given options.
Correct Answer:
The correct answer is 'd'.
Explanation:
The correct option is:
d) All of the given options.
Explanation:
- A total cost curve relates output to the total cost incurred by producing that output.
- It is generally upward-sloping, indicating that as output increases, total costs also increase.
- It gets steeper as output rises due to the diminishing marginal product of an input. This means that as more units of input (e.g., labor, capital) are added, the additional output gained from each additional unit starts to decrease, causing the total cost to rise at an increasing rate.
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7) If income elasticity is negitive, the good is:
a) Normal good
b) A substitute good
c) A complementary good
d) Inferior good
Correct Answer:
The correct answer is 'd'.
Explanation:
Income elasticity measures how the quantity demanded of a good responds to a change in consumer income. If the income elasticity of a good is negative, it means that as consumer income increases, the quantity demanded for this particular good decreases. Inferior goods are those for which demand decreases when consumer income rises, making them distinct from normal goods, whose demand increases with higher incomes.
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8) Which of the following is True about an isocost line?
a) It shows the cost of inputs needed to produce along an isoquant.
b) It shows the cost of inputs needed to produce along an expansion path.
c) It shows the input combinations that can be purchased with a given outlay of funds.
d) It shows the output combinations that can be purchased with a given outlay of funds.
Correct Answer:
The correct answer is 'c'.
Explanation:
An isocost line represents all the various combinations of inputs that a firm can purchase at a particular total cost. It displays the different combinations of labor and capital (or any other inputs) that can be acquired by spending a fixed total amount of money or resources. The line essentially illustrates the different cost combinations for various inputs, helping firms determine the most cost-efficient way to produce a certain level of output.
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9) Which of the following is TRUE for third-degree price discrimination?
a) Changing different prices to different groups based upon differences in elasticity of demand.
b) Changing each consumer the same two part tariff.
c) The use of increasing block rate pricing
d) Changing lower prices the greater the quantity purchased
Correct Answer:
The correct answer is 'a'.
Explanation:
Third-degree price discrimination involves charging different prices to different consumer groups based on their varying price sensitivities or elasticities of demand. This form of price discrimination allows firms to segment their market based on different consumer characteristics, such as age, location, or willingness to pay, and charge different prices to maximize revenue from each group.
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10) Rationing is needed due to the problem of:
a) Unemployment.
b) Inflaion.
c) Scarcity
d) Poverty.
Correct Answer:
The correct answer is 'c'.
Explanation:
Rationing is a system of allocating limited resources or goods in situations where demand exceeds supply. Scarcity, the condition of limited resources relative to the unlimited wants and needs of individuals, leads to the necessity of rationing as a method to distribute goods or resources fairly when there isn't enough to satisfy everyone's desires or demands.
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