MCQs on Economics -15

1. Marginal Cost is less than the Average Cost when Average Cost falls with
(A) an increase in output
(B) a decrease in output
(C) constant output
(D) no change in output


2. The pure monopolist obtains equilibrium level of output when
(A) Marginal Revenue = Marginal Cost
(B) Price = Marginal Cost
(C) Price is the lowest
(D) Price is the highest


3. The transformation curve is derived from the
(A) Consumption Curve
(B) Utility Possibility Curve
(C) Social Welfare Function
(D) Production Contract Curve


4. Match the items in List – I with the items in List – II :
List – I                                                                        List – II
a. Principles of Economics                                          1. Paul Sweezy
b. Kinked Demand Curve                                           2. Adam Smith
c. Principle of Maximum Social Advantage               3. Marshall
d. Law of Invisible Hand                                           4. Dalton
Codes :
      a b c d
(A) 3 1 4 2
(B) 3 2 4 1
(C) 2 1 3 4
(D) 4 3 1 2


5. Assertion (A) : The imposition of Sales Tax does not affect the profit of the monopolist.
Reason (R) : The monopolist shifts the burden of Sales Tax on to the consumer.
Codes :
(A) Both (A) and (R) are true and (R) is the correct explanation of (A).
(B) Both (A) and (R) are true, but (R) is not the correct explanation of (A).
(C) (A) is true, but (R) is false.
(D) (A) is false, but (R) is true.


6. Market demand for any goods is a function of
i. price per unit of that goods
ii. price per unit of related goods
iii. income of the consumer
iv. taste and preference of the consumer
Codes :
(A) i and ii only are true.
(B) i and iii only are true.
(C) i, ii and iii only are true.
(D) i, ii, iii and iv are true.



7. Assume that the market for the stock of Microsoft begins in equilibrium.  Then, both buyers and sellers expect that the new Linux (a competitor of Microsoft Windows) will be a large success, reducing Microsoft sales.  When the new equilibrium is reached,
(A) the price and quantity of the stock will both have risen
(B) the price and quantity of the stock will both have fallen
(C) the quantity of the stock will fall and the price will rise
(D) the price of the stock will fall but the effect on quantity cannot be risen



8. Macro economics distinguishes between the real economy and
(A) virtual economy
(B) monetary economy
(C) normative economy
(D) underground economy


9. Match the items in List – I with the items in List – II :
List – I                                                                        List– II
i. Psychological Law of Consumption  1. Ratchet Effect
ii. Relative Income Hypothesis 2. Age Structure of the Population
iii. Permanent Income Hypothesis   3. Distribution of Income
iv. Life Cycle Hypothesis    4. Backward Looking Expectations
Codes :
       i ii iii iv
(A) 3 1 4 2
(B) 2 4 1 3
(C) 3 1 2 4
(D) 4 2 3 1


10. Assertion (A) : There exits inverse relationship between interest rates and bond prices.
Reason (R) : A bond price represents the present discounted value of the payments agreed upon at the time when the bond was issued.
Codes :
(A) Both (A) and (R) are correct, and (R) is the correct explanation of (A).
(B) (A) is correct, but (R) is not the correct explanation of (A).
(C) (A) is correct, but (R) is incorrect.
(D) (A) is incorrect, but (R) is correct.


11. Assertion (A): The prices of Government securities in gift-edged market are not formed freely.
Reason (R): The Reserve Bank of India has a monopoly dealer position and the demand for Government securities has a captive nature.
Codes:
(A) (A) is true, but (R) is false.
(B) Both (A) and (R) are correct, but (R) is not the correct explanation of (A).
(C) (A) is not correct, but (R) is correct.
(D) Both (A) and (R) are correct and (R) is the correct explanation of (A).


12. Find out the correct answer from the codes given below:
Credit Rating Agencies in India
I. CRISIL
II. ICRA
III. TDICI
IV. CARE
Codes:
(A) I and II are correct.
(B) I, II and III are correct.
(C) I and IV are correct.
(D) I, II and IV are correct.


13. Regression coefficient is independent of change in
(A) Origin but not of scale
(B) Both origin and scale
(C) Scale but not of origin
(D) None of these


14. In a multiple regression with two independent variables and 12 observations F value calculated is to be tested. What will be degrees of freedom for numerator and denominator in testing procedure?
(A) 1 and 12
(B) 2 and 11
(C) 2 and 10
(D) 1 and 10


15. For a viable input-output system which conditions are postulated?
(A) Hawkins-Simon conditions
(B) Kuhn-Tucker conditions
(C) Bhagwati-Eckaus conditions
(D) Von Neumann conditions

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