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General Economics


Q.1. An increase in the demand can result from:
(a) A decline in market price.
(b) An increase in income.
(c) A reduction in the price of substitutes.
(d) An increase in the price of complements

Q.2. In the short run if a perfectly competitive firm finds itself operating at a loss, it will:
(a) Reduce the size of its plant to lower fixed costs.
(b) Raise the price of its product.
(c) Shut down.
(d) Continue to operate as long as it covers its variable cost.

Q.3. A competitive firm maximizes profit at the output level where:
a) Price equals marginal cost.
(b) The slope of the firm’s profit function is equal to zero.
(c) Marginal revenue equals marginal cost.
(d) All of the above.

Q.4. Which of the following is correct?
(a) Normative economics is not concerned with value judgment.
(b) A market is a process that reconciles consumer decision, production decisions and labour decisions.
(c) A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy.
(d) Both (b) and (c).

Q.5. A necessity is defined as a good having:
(a) A positive income elasticity of demand.
(b) A negative income elasticity of demand.
(c) An income elasticity of demand between zero and 1.
(d) An income elasticity of more than 1.

Q.6. In the long run any firm will eventually leave the industry if:
(a) Price does not at least cover average total cost.
(b) Price does not equal marginal cost.
(c) Economies of scale are being reaped.
(d) Price is greater than long run average cost.

Q.7. If a firm’s average variable cost curve is rising, its marginal cost curve must be:
(a) Constant.
(b) Above the total cost curve.
(c) Above the average variable cost curve.
(d) All of the above.

Q.8. You are given the following data:
Table 1
Output Total Costs
0 0
1 15
2 30
3 45
4 60
5 75
The above data is an example of:
(a) Constant returns to scale.
(b) Decreasing returns to scale.
(c) Increasing returns to scale.
(d) Globalization.

Q.9. Which of the following is incorrect?
(a) The central problem in economics is that of allocating scarce resources in such a manner that society’s unlimited needs are satisfied as well as possible.
(b) In mixed economy, the government and the private sector interact in solving the basic economic questions.
(c) Microeconomics best describes the study of the behaviour of individual agents.
(d) An important theme in economics is that market systems are better than command (socialistic) economies.

Q.10. When a market is in equilibrium:
(a) No shortages exist.
(b) Quantity demanded equals quantity supplied.
(c) A price is established that clears the market.
(d) All of the above are correct.

Q.11. Which among the following is incorrect?
(a) India adopted planning as her way of life because she wanted to quicken industrialization and economic development with optimum utilization of resources and reduction of inequalities.
(b) Removal of poverty and the attainment of self reliance were two basic objectives of the fifth plan.
(c) India has never been able to achieve its targeted rate of growth.
(d) The Second plan was a very ambitious plan as seeds of industrialization were sowed.

Q.12. Reserve Bank of India is India’s:
(a) Central bank
(b) Biggest commercial bank
(c) Biggest cooperative bank
(d) All of the above

Q.13. In infrastructure of an economy we include:
(a) Power
(b) Transport
(c) Banking
(d) All of the above

Q.14. Find the odd one out:
(a) State Bank of India
(b) Reserve Bank of India
(c) Bank of Baroda
(d) Bank of India

Q.15. Indian economy is mixed economy because:
(a) Agriculture and industry have both simultaneously developed in India.
(b) Agriculture and industry have both developed in the public sector.
(c) Private ownership and public ownership over means of production co-exist.
(d) Any of the above.

Q.16. What is the contribution of agriculture to National income in India (2013-14) Constant Price?
(a) 44%
(b) 14%
(c) 34%
(d) 50%

Q.17. In a ___ budget revenue equals expenditure.

(a) Balanced
(b) Deficit
(c) Surplus
(d) Long term

Q.18. Indian population registered a growth of 1.25% per annum during the decade ___.
(a) 1941-51
(b) 1961-71
(c) 1971-81
(d) 1981-91

Q.19. India’s population recorded the maximum growth rate of 2.22 % per annum during the decade ___.
(a) 1941-51
(b) 1961-71
(c) 1971-81
(d) 1981-91

Q.20. Suppose India’s GNP increased at an annual average rate of 6.6% during the Tenth plan, presuming that the growth rate of population is 2 per cent per annum; per capita income would increase at an annual average rate of ___.
(a) 3.3%
(b) 4.6%
(c) 6.6%
(d) 2%

Q.21. About ___ area is rain fed in India.
(a) 50%
(b) 40%
(c) 55%
(d) 80%

Q.22. Fiat money is some thing which ___.
(a) depriciates fast
(b) has stability in value
(c) has huge intri nsic value
(d) has no intrinsic value

Q.23. ___ FDI is allowed in private banking in India.
(a) 74%
(b) 100%
(c) 49%
(d) 26%

Q.24. MSME sector contributes nearly ___ of the total exports in India.
(a) 60%
(b) 35%
(c) 40%
(d) 20%

Q.25. Services account for around ___ of total export of India.
(a) one-fourth
(b) one-third
(c) one-half
(d) one-tenth

Q.26. Product method of calculating national income is also known as ___.
(a) Income method
(b) Value added method
(c) Expenditure method
(d) Distribution method

Q.27. NDP is GDP minus ___.
(a) Depreciation.
(b) Indirect taxes.
(c) Subsidies
(d) NNP

Q.28. In 2012-13, direct taxes were around ___ % of GNP.
(a) 10
(b) 15
(c) 12
(d) 7

Q.29. Abolition of intermediaries and tenancy reforms are both parts of ___.
(a) Industrial reforms in India.
(b) External sector reforms in India.
(c) Land reforms in India.
(d) Banking reforms in India.

Q.30. A sick industrial unit in India is one ___.
(a) Where most of the employees are sick.
(b) If any of the borrowal account of the enterprise remain NPA for 3 months or more or if there is erosion due to accumulated losses to the extent of 50% of its net worth during the previous accounting year.
(c) Which is unable to make profits more than 10 percent of its capital employed.
(d) Which borrows money from bank for its fixed assets.

Q.31. BPO stands for ___.
(a) Bharat Petro Organisation
(b) Business Process Outsourcing
(c) Big Portfolio Outsourcing
(d) Business Partners Organisation

Q.32. India accommodates about ___ percent of the world’s population.
(a) 17.5%
(b) 11.4%
(c) 15.1%
(d) 25.8%

Questions Number 33 to 35 are based on Figure 1 which shows production possibilities curve (PPC) for grape juice and wine.


The opportunity cost of increasing wine production from D to E is:
(a) 0 litres of grape juice.
(b) 5 litres of grape juice.
(c) 1 litre of wine.
(d) 0.2 litres of wine.

Q.34. Assuming that the PPC does not shift, which of the following is true?
(a) Point A is desirable but is inefficient.
(b) Point D represents a more efficient allocation of resources than points A and F.
(c) Point H is desirable but is not attainable.
(d) If wine production equals 7 litres, the maximum amount of grape juice that can be produced
simultaneously is 28 litres.

Q.35. The PPC in the diagram reflects:
(a) Increasing opportunity cost of more wine production and constant opportunity cost of
more grape juice production.
(b) Increasing opportunity cost of more wine production and decreasing opportunity cost of
more grape juice production.
(c) Decreasing opportunity cost of more wine production and decreasing cost of more grape
juice production.
(d) Increasing opportunity cost of more wine production and increasing cost of more grape
juice production.

Read the following paragraph and answer questions 36 and 37.

John is Jacqueline’s father. Both of them are unemployed. Jacqueline, a brilliant new Ph.D in Economics, has turned down many job offers because she hopes eventually to teach at one of the top ten universities in her field. John lost his job as a shipbuilder during the recession of 1991. His plant never reopened and he has very specialized skills that are no longer in demand.

Q.36. The type of unemployment Jacqueline is experiencing is
(a) Frictional.
(b) Structural.
(c) Seasonal.
(d) Cyclical.

Q.37. The type of unemployment John is experiencing is
(a) Frictional.
(b) Structural.
(c) Seasonal.
(d) Cyclical.

Q.38. In the table below what will be equilibrium market price?
(tonnes per annum)
(tonnes per annum)
1 1000 400
2 900 500
3 800 600
4 700 700
5 600 800
6 500 900
7 400 1000
8 300 1100
(a) Rs. 2
(b) Rs. 3
(c) Rs. 4
(d) Rs. 5

Read Table 3 and answer questions 39-43

Table 3
Output Average
0 0 -- --
2 5 9 25
4 90 25 4
6 120
8 140
10 10 14
12 14 10


At a labour input of 2, output is:
(a) 25
(b) 30
(c) 50
(d) 75

Q.40. At a labour input of 4, output per worker is:
(a) 20
(b) 22.5
(c) 45
(d) 90

Q.41. At a labour input of 6, the marginal product of labour is:
(a) 120
(b) 20
(c) 15
(d) 10

Q.42. Output per worker is maximized at a labour input of:
(a) 4
(b) 2
(c) 6
(d) 8

Q.43. The firm’s output is at a short run maximum at a labour input of :
(a) 6
(b) 10
(c) 12
(d) 2

Table 4 provides cost and price information for a firm called Comfy Cushions (CC). The firm produces and sells cushions using a fixed amount of capital equipment but can change the level of inputs such as labour and materials. Read Table 4 and answer questions 44-50


What is the value of fixed cost incurred by CC?
(a) Rs. 250
(b) Rs. 730
(c) Rs. 500
(d) cannot be determined

Q.45. What is the average total cost when 5 units are produced?
(a) Rs. 218
(b) Rs. 1090
(c) Rs. 730
(d) Rs. 210

Q.46. What is the marginal revenue (per unit) when production increases from 7 units to 8 units?
(a) 160
(b) 140
(c) 120
(d) 100

Q.47. What is the marginal cost when production increases from 3 to 4 units?
(a) 140
(b) 80
(c) 60
(d) 240

Q.48. To maximize its profit or minimize its loss, what level of production should CC choose?
(a) 7 units.
(b) 6 units
(c) 4 units.
(d) 8 units.

Q.49 At the profit maximizing level, what price should be charged?
(a) Rs. 190
(b) Rs. 200
(c) Rs. 210
(d) Rs. 220

Q.50. Calculate CC’s maximum profit or minimum loss.
(a) Loss of Rs. 100
(b) Loss of Rs. 60
(c) Profit of Rs. 90
(d) Loss of Rs. 90

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