Introduction to Economics MCQs | ECO401 MCQs | Set 9
Introduction to Economics MCQs | ECO401 MCQs | Set 9
MCQs (Multiple Choice Questions)
1) In pure capitalism, the role of government is best described as:
a) Significant.
b) Extensive.
c) Nonexistent.
d) Limited.
Correct Answer:
The correct answer is 'd'.
Explanation:
Pure capitalism or laissez-faire capitalism advocates for minimal government intervention in the economy. In this system, the government's role is limited, focusing primarily on enforcing contracts, protecting private property rights, and maintaining law and order rather than actively regulating or controlling economic activities.
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2) Microeconomics is the branch of economics that deals with which of the following topics?
a) The behavior of individual consumers.
b) Unemployment and interest rates.
c) The behavior of individual firms and investors.
d) The behavior of individual consumers and behavior of individual firms and investors.
Correct Answer:
The correct answer is 'd'.
Explanation:
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3) While moving from left to right, the typical production possibilities curve has:
b) A decreasingly steep negative slope.
c) An increasingly steep positive slope.
d) A constant and negative slope.
Correct Answer:
The correct answer is 'b'.
Explanation:
As you move from left to right on a typical production possibilities curve, the negative slope becomes increasingly steep, indicating the increasing opportunity cost of producing more of one good as more of the other good is foregone.
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4) When government sets the price of a good and that price is above the equilibrium price, the result will be:
a) A surplus of the good.
b) A shortage of the good.
c) An equilibrium.
d) None of the given options.
Correct Answer:
The correct answer is 'a'.
Explanation:
An above-equilibrium price set by the government leads to a situation where the price is higher than what the market dictates. This results in a surplus, where the quantity supplied exceeds the quantity demanded at that price, causing an excess of the product in the market.
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5) If pen and ink are complements, then an increase in the price of pen will cause:
a) An increase in the price of ink.
b) Less ink to be demanded at each price.
c) A decrease in the demand for pen.
d) A rightward shift in the demand curve for ink.
Correct Answer:
The correct answer is 'b'.
Explanation:
Complementary goods are those that are used together, such that an increase in the price of one leads to a decrease in the demand for the other. If the price of pens, a complementary good for ink, increases, it typically results in a reduction in the demand for ink, as people buy fewer pens, subsequently reducing their need for ink used with those pens.
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6) An increase in supply is shown by:
a) Shifting the supply curve to the left.
b) Shifting the supply curve to the right.
c) Upward movement along the supply curve.
d) Downward movement along the supply curve.
Correct Answer:
The correct answer is 'b'.
Explanation:
An increase in supply is shown by:When there's an increase in supply, it means that more of a good or service is available at every price. This results in the supply curve shifting to the right, indicating that at each price, a greater quantity is supplied than before.
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7) When an industry's raw material costs increase, other things remaining the same:
a) The supply curve shifts to the right.
b) Output increases regardless of the market price and the supply curve shifts upward.
c) Output decreases and the market price also decrease.
d) The supply curve shifts to the left.
Correct Answer:
The correct answer is 'd'.
Explanation:
An increase in raw material costs typically leads to higher production expenses. In response, producers may supply less at every given price, causing the supply curve to shift to the left, signifying a decrease in the quantity supplied across different price levels.
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8) The price elasticity of demand measures the responsiveness of quantity demanded to:
a) Quantity demanded.
b) Quantity supplied.
c) Price.
d) Output.
Correct Answer:
The correct answer is 'c'.
Explanation:
Price elasticity of demand quantifies how the quantity demanded of a good or service changes in response to changes in its price. It indicates the degree of sensitivity or responsiveness of consumers' demand to alterations in the product's price.
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9) Since the fish that are caught each day go bad very quickly, the daily catch will be offered for sale no matter what price it brings. As a result, we know that:
a) None of the given options.
b) The daily supply curve for fish slopes upward.
c) The daily supply curve for fish is perfectly inelastic.
d) The daily supply curve for fish is perfectly elastic.
Correct Answer:
The correct answer is 'c'.
Explanation:
This is because the fish that are caught each day must be sold that day, or they will go bad. As a result, fishermen are willing to sell their catch at any price, regardless of how low it may be.
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10) In order to calculate the price elasticity of supply, you need to know:
a) Two prices and two quantities supplied.
b) The slope of the supply curve.
c) The equilibrium price and quantity in the market.
d) The quantity supplied at two different prices, all else equal.
Correct Answer:
The correct answer is 'd'.
Explanation:
Price elasticity of supply is determined by comparing the quantity supplied at two different prices while holding other factors constant. It's calculated as the percentage change in quantity supplied divided by the percentage change in price, helping to assess the responsiveness of quantity supplied to changes in price.
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