Intermediate Microeconomics BA Hons Economics MCQs

SECTION – A
MULTIPLE CHOICE QUESTIONS

UNIT-I

Question. Of ‘real wages’ and ‘money wages’
(a) The former is a wider concept than the latter
(b) The latter is a wider concept than the former
(c) Both concept mean the same thing
(d) All of the above

Question. The ‘iron law of wages’ is
(a)The wage-fund theory
(b)The marginal productivity theory of wages
(c)Collective bargaining
(d)The subsistence theory of wages

Question. According to Prof Knight, profit is the reward for
(a) Innovation
(b) Capital
(c) Foreseeable risks
(d) Uncertainty bearing

Question. The uncertainty-bearing theory of profit was propounded by
(a) F. H. Knight
(b) F. B. Hawley
(c) P. A. Samuelson
(d) Joseph Schumpeter

Question. Some economists say that profit earner is a kind of:
(a) Wage earner
(b) Rent receiver
(c) Interest receiver
(d) Govt. officer

Question. Risks in the business arise because of:
(a) Introduction of the new products
(b) Uncertain policy of rival firms
(c) Changes in tastes
(d) All the above

Question. Changes in the rate of interest affect the amount of money held for
(a) transaction motive
(b) precautionary motive
(c) speculative motive
(d)Normal Motive

Question. The marginal productivity theory of distribution is associated with
(a) Adam Smith
(b) Lionel Robbins
(c) J. B. Clark
(d) Bergson

Question. Which among the following is NOT an assumption of Pareto optimality?
(a) Every consumer wishes to maximize his level of satisfaction.
(b) All the factors of production are used in the production of every commodity.
(c) Conditions of perfect competition exist making all the factors of production perfectly mobile
(d) The concept of utility is cardinal and cardinal utility function of every consumer is given.

Question. Which of the following is not included in the assumptions of Clark’s marginal productivity of distribution
(a) Perfect competition
(b) Constant population
(c) Constant amount of capital
(d) Labour is heterogeneous

Question. Profits:
(a) Are lower in the long run than in the short run
(b) Can be negative
(c) Are less in perfect competition than in monopoly
(d) All of the above

Question. Profits arise because an entrepreneur:
(a) Prepares plan
(b) Innovates
(c) Lends money
(d) Both (a) and (b)

Question. Gross profit does NOT include:
(a) Rent of land owned by the firm
(b) Pure profit
(c) Interest on capital owned by firm
(d) Taxes

Question. When a firm’s average revenue is equal to its average cost, it gets ________.
(a) Sub normal profit
(b) Normal profit
(c) Abnormal profit
(d) Super profit

Question. Given the price, if the cost of production increases because of higher price of raw materials, the supply
(a) Decrease
(b) Increase
(c) Remains the same
(d) Any of the above

Question. Under ______, price is determined by the interaction of total demand and total supply in the market.
(a) Perfect competition
(b) Monopoly
(c) Imperfect competition
(d) Monopolictic Competition

Question. As for the cost of production of an individual farmer, the rent paid by him
(a) Enters into the price of his product
(b) None of these
(c) Does not enter into price of his product
(d) Is unjustified

Question. He presented a theory of rent
(a) Malthus
(b) Prof. Knight
(c) Ricardo
(d) Marshall

Question. The following affect rent EXCEPT
(a) Better location
(b) Fertility of land
(c) Cleverness of landlords
(d) Scarcity of land

Question. With decrease in price of bonds, rate of interest:
(a) Decreases
(b) Increases
(c) Does not change
(d) None of the above

Question. Every factor of production gets reward equal to its:
(a) Cost
(b) Marginal product
(c) Price
(d) Increasing return

Question. According to Keynes, interest is a payment for:
(a) Use of durable goods
(b) Use of capital
(c) Use of money
(d) Use of land

Question. An increase in the wage rate:
(a) Will usually lead to more people employed
(b) Will decrease total earnings of employees if the demand for labour is wage elastic
(c) Is illegal in a free market
(d) Will cause a shift in the demand for labour

SECTION – B
MULTIPLE CHOICE QUESTIONS

Question. The concept of quasi-rent was introduced by ________.

Question. According to ______________Theory of Rent, rent accrues to Any factor.

Question. According to ____________ risks are of two kinds.

Question. The supply of _______________is inelastic.

Question. Land that do not rent is called _______________land according to Ricardo.

Question. The subsistence theory of wages is also known as the ________ law of wages’.

Question. The Marginal Revenue Product is usually ___________sloping due to the law of diminishing returns.

Question. Keynes is famous for his theory of ____________________.

Question. The economist ___________ argued that prices were high because land rents were low.

Question. David Ricardo presented ____________ theory.

Question. Quasi rent occurs in the __________ run.

Question. With a given wage fund, wages can be increased by __________ the number of workers.

Question. Loanable fund theory is also called _________________ theory.

Question. Loanable theory was first formulated by ___________________.

Question. Liquidity preference theory is also known as __________________ theory.

Question. Keynesian theory of______________ is a stock concept.

Question. JB Clarkn introduced the _________theory of profit.

Question. Accoring to modern theory, the difference between the actual earnings and the transfer earnings of factors of production is called ______________ rent

UNIT-II

Question. Factor prices are determined in the market under forces of
(a) Elasticity of demand
(b) Elasticity of supply
(c) Elasticity and supply
(d) None of the above

Question. Demand for factor of production is
(a) Supplementary demand
(b) Intermediate goods
(c) Derived demand
(d) Complementary demand

Question. The supply of a good refers to:
(a) Stock available for sale
(b) Total stock in the warehouse
(c) Actual Production of the good
(d) Quantity of the good offered for sale at a particular price per unit of time

Question. The cost of one thing in terms of the alternative given up is called:
(a) Real cost
(b) opportunity cost
(c) Production cost
(d) Physical cost

Question. The producer’s demand for a factor of production is governed by the ___ of that factor.
(a) Price
(b) Marginal Productivity
(c) Availability
(d) Profitability

Question. On which law of consumption the concept of consumer’s surplus is based?
(a) Engel’s law
(b) Law of demand
(c) First law of Gossen
(d) Second law of Gossen

Question. The firm is in equilibrium in the factor market when it employs units of labour upto the point where
(a)The marginal revenue product of labour is equal to its marginal cost
(b) The marginal revenue product of labour is more than its marginal cost
(c) The marginal revenue product of labour is less than its marginal cost
(d) None of the above

Question. A market system, where there is only one seller is known as
(a) Monopoly
(b) Monopolistic competition
(c) Oligopoly
(d) Monopsony

Question. Factor prices are determined in the factor market under the forces of
(a) Marginal productivity
(b) Elasticity of demand
(c) Elasticity of supply
(d) Demand and supply

Question. The labour market equilibrium determines the wage rate and
(a) Investment
(b) Employment
(c) Savings
(d) Profits

Question. Equilibrium conditions for factor market is
(a)Demand for factors is equal to supply of factors
(b) Demand for factors is less than supply of factors
(c) Demand for factors is more than supply of factors
(d) None of the above

Question. he relation that the law of demand for factor defines is.
(a) Income and quantity demanded of a factor
(b) Price and quantity of a factor
(c) Income and price of a factor
(d) Quantity demanded and quantity supplied of a factor

Question. Union leaders are in a better position to bargain for higher wages if demand for labour is
(a) Elasti
(b) Inelastic
(c) Very larg
(d) Permanent

Question. A rise in supply and demand in equal proportion will result in:
(a) Increase in equilibrium price and decrease in equilibrium quantity
(b) Decrease in equilibrium price and increase in equilibrium quantity
(c) No change in equilibrium price and increase in equilibrium quantity
(d) Increase in equilibrium price and no change in equilibrium quantity

Question. Increasing the minimum wage for workers will:
(a) Sole the unemployment problem
(b) Result in scarcity of workers
(c) Cause a substitution of capital for labour
(d) Decrease the MP of those workers

Question. The price of capital is
(a) money
(b) Interest
(c) profits
(d) wages

Question. Sometimes the supply curve of labour ends:
(a) Downward
(b) Upward
(c) Backward
(d) Firstly upward and then downward

Question. A firm maximizes profit if:
(a) MRP = Wage rate
(b) MRP is rising
(c) MRP = ARP
(d) None of these

Question. The opportunity cost of a machine which can produce only one product is:
(a) Low
(b) Infinite
(c) High
(d) Medium

Question. Price of a product is determined in a free market:
(a) By demand for the product
(b) By supply of the product
(c) By both demand and supply
(d) By the government

Question. In market equilibrium, supply is vertical line. The downward sloping demand curve shifts to the rights. Then
(a) Price will rise
(b) Quantity rises
(c) Price remains same
(d) Price will fall

Question. If MRP > Price of the factor: firm should hire
(a) less factors
(b) more factors
(c) the same factors
(d) All of the above

Question. Union leaders are in a worse position to bargain for higher wages if demand for labour is
(a) perfectly Elastic
(b) perfectly Inelastic
(c) Very large
(d) Permanent

SECTION – B
MULTIPLE CHOICE QUESTIONS

Question. The the additional revenue generated by employing an additional unit of a factor is called ___________________.

Question. In the real world, the __________________market is imperfect.

Question. In monopsony, there is only one buyer of factors of production and a large number of __________.

Question. Monopsony is the buying-side equivalent of a selling-side __________________.

Question. _____________ is the combination of a monopoly market on the selling side and a monopsony market on the buying side.

Question. ____________ supply is the willingness and ability of scarce resources or factors of production to offer their services for use in productive activities.

Question. Monopsony is a market system where there is only one _____________.

Question. Monopoly is a market system, where there is only one __________________ .

Question. Under perfect competition, the MRP curve represents the ________________ for a factor.

Question. Firm should hire more factors if __________________ > Price of the factor:

UNIT-III

Question. The concept of social optimum was introduced in Welfare Economics by
(a) Vilfredo Pareto
(b) A. C. Pigou
(c) Adam Smith
(d) A. Marshall

Question. An ethical or value judgement must be made in order to derive the
(a) Transformation curve
(b) Grand utility possibly curve
(c) Consumption contract curve
(d) Social welfare function

Question. “Social welfare increases when transfer of real income from the rich to poor increases” is a atement given by
(a) Kaldor-Hicks
(b) A. C. Pigou
(c) Pareto
(d) Prof . Bergson

Question. Bergson’s name is associated with
(a) Social welfare function
(b) Pareto Optimality criterion
(c) Compensation criterion
(d) Welfare maximization criterion

Question. If some allocation of resources is Pareto efficient, then that allocation satisfies:
(a) allocative efficiency and productive efficiency.
(b) allocative efficiency and distributive efficiency.
(c) productive efficiency and distributive efficiency.
(d) allocative efficiency, productive efficiency, and distributive efficiency.

Question. When two commodities X and Y must be allocated among consumers, a necessary condition for distributive efficiency is that:
(a) all firms be price takers.
(b) all firms minimize cost.
(c) commodity X must be allocated to the consumers with the largest values of MRSXY
(d) the marginal rates of substitution MRSXY for all consumers must be equal.

Question. According to Kaldor-Hicks compensation criteria, the proposed change will increase the social welfare if
(a) The gains are equal to the losses
(b) The gains are greater than the losses
(c) The losses are greater than the gains
(d) None of the above

Question. The concept of Social Welfare function was firstly introduced by
(a) Pareto
(b) Kaldor
(c) Bergson
(d) Samuelson

Question. Social Welfare function is a function of
(a) All the individuals constituting the society
(b) All consumers excluding producers
(c) Only sample of individuals in society
(d) None of the above

Question. Kaldor-Hicks compensation principle can be explained with the help of
(a) Utility possibility curve
(b) Indifference curve
(c) Equal product curve
(d) Kuznet’s curve

Question. In Pareto welfare economics, Efficiency of distribution of commodities among consumers is related to
(a) efficiency in production
(b) efficiency in exchange
(c) efficiency in product-mix
(d) All of the above

Question. In Pareto welfare economics, Efficiency in the allocation of factors among commodities is related to
(a) efficiency in production
(b) efficiency in exchange
(c) efficiency in product-mix
(d) All of the above

Question. The necessary condition for allocative efficiency is that each commodity be produced in an amount that makes the marginal benefit to society of the last unit produced equal to the marginal cost to society of that last unit. The satisfaction of this condition in a market economy relies on the assumptions of:
(a) utility maximization, profit maximization, and perfect competition.
(b) utility maximization and profit maximization, but not perfect competition.
(c) profit maximization and perfect competition, but not utility maximization.
(d) utility maximization and perfect competition, but not profit maximization.

Question. Growth of GNP as A Criterion of Welfare was advocated by
(a) Kaldor-Hicks
(b) Adam Smith
(c) A. C. Pigou
(d) Prof . Bergson

Question. Who defines economic welfare as “that part of social (general) welfare that can be brought directly or indirectly into relation with the measuring rod of money.”
(a) Kaldor-Hicks
(b) A. C. Pigou
(c) Pareto
(d) Prof . Bergson

Question. In Pareto welfare economics, Efficiency of the allocation of factors among firms is related to
(a) efficiency in production
(b) efficiency in exchange
(c) efficiency in product-mix
(d) All of the above

Question. Who among the following economist accepted growth of GNP as a criterion of Social Welfare
(a) Nicholas Kaldor
(b) Adam Smith
(c) Jeremy Bentham
(d) Ohlin

SECTION – B
MULTIPLE CHOICE QUESTIONS

Question. Adam Smith implicitly accepted the growth of the wealth of a society, that is, the growth of the gross _____________________ product, as a welfare criterion.

Question. Nicholas _________and John Hicks suggested the compensation approach to establish¬ing a welfare criterion.

Question. Every point on the grand utility possibility curve represents a ______________ and as we move from one point to another.

Question. In his book, “Economics of Welfare”, AC Pigou distinguishes between the social welfare and ________________ welfare.

Question. According to AC Pigou, Each individual tries to maximise his _______________ from his expenditure on different goods and services.

Question. _______________regard economic welfare and national income as essentially coordinate.

Question. In Pareto welfare economics, efficiency in production is also known as Efficiency of the allocation of factors among __________________.

Question. The marginal condition for a Pareto-optimal allocation of factors requires that the MRTS between labour and capital be equal for all_______________ produced by different firms.

Question. Popular methods of capital budgeting include net present value (NPV), internal rate of return (IRR), discounted cash flow (DCF) and _____________period.

Question. _______________ was the first economist to give a welfare criterion based on compensating payments.

UNIT –IV

Question. If inflation occurs, investment will be
(a) More profitable
(b) Less profitable
(c) More difficult
(d) None of the above

Question. In an investment project, the lower the rate of interest
(a) No significant change in the value of the project
(b) The lower the present value of the project
(c) The higher the present value of the project
(d) None of the above

Question. The rate of discount which equilibrates the cost of capital good s and the expected future returns from the capital good is known as
(a) Internal rate of return
(b) Net present value
(c) Average annual rate of return
(d) None of the above

Question. -___________ on capital is called ‘Cost of capital’.
(a) Lower expected return
(b) Normally expected return
(c) Higher expected return
(d) None of the above

Question. A project is accepted when
(a) Net present value is greater than zero
(b) Profitability index will be greater than unity
(c) Internal Rate of Return will be greater than cost of capital
(d) Any of the above

Question. Air pollution can be termed as a
(a) Social benefit
(b) Social cost
(c) Social security measure
(d) All of the above

Question. Internal rate of return is also identified as the
(a) Price and location criteria
(b) Physical and location criteria
(c) Price and physical criteria
(d) None of the above

Question. The net present value
(a) Is calculated by discounting all cash flows to present value and subtracting outflows from inflows
(b) Calculates the rate of return which leaves you indifferent between undertaking the project, and not undertaking the project.
(c) Leads to the same decisions as the use of the payback period.
(d) Would suggest that we accept projects with a negative net present value.

Question. When using the net present value and the internal rate of return to evaluate capital projects:
(a) The IRR is preferred because it more closely reflects the firm’s goal of maximization of shareholder wealth.
(b) Both will lead to the same decision if projects are mutually exclusive.
(c) The two techniques may give different answers if the initial costs of the projects differ.
(d) Both assume that the firm can reinvest earnings at the same rate.

Question. With limited finance and a number of project proposals at hand, select that package of projects which has
(a) The maximum net present value
(b) Internal rate of return is greater than cost of capital
(c) Profitability index is greater than unity
(d) Any of the above

Question. The Internal Rate of Return is defined as
(a) the discount rate which causes the payback to equal one year.
(b) the discount rate which causes the NPV to equal zero.
(c) the ROE when the NPV equals 0.
(d) the ROE associated with project maximization

Question. The higher the interest rate
(a) The more valuable revenue today is in comparison with revenue in the future.
(b) The less valuable revenue today is in comparison with revenue in the future
(c) The less costs today should be considered in capital budgeting
(d) The less concerned you should be about the timing of a stream of revenue.

Question. The values of the future net incomes discounted by the cost of capital are called
(a) future income
(b) Internal rate of return
(c) Net present values
(d) Discounted capital cost

Question. The project is accepted of
(a) the profitability index is equal to one
(b) The funds are unlimited
(c) the profitability index is greater than one
(d) Both (b) and (c)

Question. Where capital availability is unlimited and the projects are not mutually exclusive, for the same cost of capital, following criterion is used
(a) Net present value
(b) Internal Rate of Return
(c) Profitability Index
(d) All of the above

Question. if the internal rate of return (r) is less than the cost of capital,the project should be
(a) accepted
(b) rejected
(c) neither accept nor reject
(d) none of the above

SECTION – B
MULTIPLE CHOICE QUESTIONS

Question. The ________________value of money is sometimes referred to as the net present value (NPV) of money.

Question. _________________ refers to the difference between the value of cash now and the value of cash at a future date

Question. IRR is also called Marginal Efficiency of __________________.

Question. According to the internal rate of return method, if the internal rate of return (r) of a capital project is greater than the cost of capital, the project should be _______________.

Question. The concept of cost benefit analysis was introduced in the year 1848 by _________________.

UNIT-V

Question. The basis of trade between countries lies in the
(a) Difference in monetary standard
(b) Difference in political system
(c) Difference in resource endowment
(d) None of the above

Question. Trade among different regions within the same country is known as
(a) International trade
(b) Interregional trade
(c) Bilateral trade
(d) Trilateral trade

Question. Heckscher-Ohlin theory of international trade is based on
(a) Factor price equalization
(b) Absolute advantage
(c) Factor endowment differentials
(d) Labour productivity

Question. The imposition of an import tariff by a nation usually
(a) improves the nation’s terms of trade and increases the volume of trade
(b) worsens the nation’s terms of trade but increases the volume of trade
(c) improves the nation’s terms of trade but reduces the volume of trade
(d) None of the above

Question. One similarity between international trade and inter-regional trade is that in general both must overcome
(a) The difference in language
(b) Tariffs
(c) Distance or space
(d) The difference in currencies

Question. The basis of trade between countries lies in the
(a) The difference in factor endowment
(b) The difference in money standard
(c) Difference in political system
(d) All of the above

Question. The absolute advantage theory of international trade is associated with
(a) David Ricardo
(b) Adam Smith
(c) Samuelson
(d) Heckscher-Ohlin

Question. Trade between nations occur due to
(a) Difference in monetary
(b) Difference in resource endowment
(c) Difference in political status
(d) Difference in population

Question. The absolute advantage theory of international trade is associated with
(a) David Ricardo
(b) Adam Smith
(c) Alfred Marshall
(d) Heckscher-Ohlin

Question. If a nation has a comparative advantage in the production of a good,
(a) it can produce that good at a lower opportunity cost than its trading partner.
(b) it can benefit by restricting imports of that good
(c) it can produce that good using fewer resources than its trading partner.
(d) it must be the only country with the ability to produce that good

Question. According to the principle of comparative advantage,
(a) countries should specialize in the production of goods that they enjoy consuming.
(b) countries should specialize in the production of goods for which they have a lower opportunity cost of production than their trading partners.
(c) countries with a comparative advantage in the production of every good need not specialize.
(d) countries should specialize in the production of goods for which they use fewer resources in production than their trading partners.

Question. Infant industry argument’ in international trade is given in support of:
(a) Granting Protection
(b) Free trade
(c) Curbing export
(d) None of the above

Question. The exchange of goods and services are known as
(a) International Trade
(b) Trade
(c) None of these
(d) Domestic Trade

Question. Which is not an advantage of international trade:
(a) Export of surplus production
(b) Import of defence material
(c) Dependence on foreign countries
(d) Availability of cheap raw material

Question. The first classical theory of International Trade is given by
(a) Friedman
(b) Keynes
(c) Adam Smith
(d) Heckscher-Ohlin

Question. The Heckscher-Ohlin approach to international trade provides important insights, in
(a) Gains from trade
(b) Effect of trade on production and consumption
(c) Effect of trade on the incomes of production factors
(d) All of the above

Question. Which of the following trade policies limits specified quantity of goods to be imported at one tariff rate.
(a) Quota
(b) Import tariff
(c) Specific tariff
(d) All of the above

Question. Which of the following is not a benefit of international trade?
(a) High wage levels for all domestic workers
(b) Lower domestic prices
(c) Development of more efficient methods and new products.
(d) A greater range of consumption choices.

Question. Who benefits from tariff protection?
(a) Domestic consumers on the good produced
(b) Domestic producers of the good produced
(c) Foreign producers of the good produced
(d) Foreign consumers of the good produced.

Question. A main advantage in specialisation results from:
(a) Economies of large-scale production
(b) The specializing country behaving as monopoly
(c) Smaller production runs resulting in lower unit costs.
(d) High wages paied to foreign workers.

Question. In classical theory of International Trade, the exchange of goods and services takes on the basis of ………….. system?
(a) Barter
(b) Money
(c) Labour
(d) Capital

Question. If capital is available in large proportion and labour is less, then that economy is known as
(a) Capital Intensive
(b) Labour Intensive
(c) Both a. and b
(d) None of above

Question. In Heckscher Ohlin theory, what is assumed to be same across the countries?
(a) Capital
(b) Labour
(c) Transportation cost
(d) Technology

SECTION – B
MULTIPLE CHOICE QUESTIONS

Question. Comparative advantage is a comparison based on________________ cost.

Question. The _______________ from trade can be measured by the increase in total production that comes from specialization.

Question. ________________trade means one country comes into trade with more than one country.

Question. Trade between two states in an economy is known as ______________________ trade.

Question. Absolute advantage theory is given by _______________________.

Question. _____________________ cost is also known as Next Best alternative.

Question. The largest item of Indian import list is _________________.

Question. Transformation cost is also known as ___________cost.