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General Economics

Q.1. If budget deficit is Rs. 11,350 crore and borrowings are Rs. 33,300 crore, what is fiscal deficit?
(a) Rs. 11,350 crore
(b) Rs. 44,650 crore
(c) Rs. 33,300 crore
(d) Rs. 21,950 crore


Sir Robert Giffen was surprised to find out relationship of price with two other goods, which were:
(a) Bread and Rice
(b) Meat and Rice
(c) Bread and Meat
(d) Cheese and Meat

Q.3. If the proportion of income spent on a good remains the same as income increases, then income elasticity for the good in:
(a) More than one
(b) One
(c) Less than one
(d) Zero

Q.4. Marginal utility analysis was mainly propounded by:
(a) J.B. Say
(b) Robbins
(c) Adam Smith
(d) Alfred Marshall

Q.5. Indifference curve analysis is propounded by:
(a) Alfred Marshall
(b) Adam Smith
(c) Hicks and Allen
(d) None of the above

Q.6. Cardinal Measurability of utility means:
(a) Utility can be measured
(b) Utility cannot be measured
(c) Utility can be ranked
(d) Utility can be measured in some case

Q.7. Which of the following statements is false?
(a) An indifference curve is concave to the origin
(b) An indifference curve is convex to the origin
(c) A higher indifference curve is better than a lower indifferent curve
(d) An indifference curve is a curve which represents all those combinations of two goods which give same satisfaction to the consumer.

Q.8. Identify the factor which generally keeps the price-elasticity of a demand for a good high.
(a) Its very high price
(b) Its very low price
(c) Large number of substitutes
(d) None of the above

Q.9. Suppose price of fashionable Shirts rises from Rs. 400 per piece to Rs. 700 per piece. The Shopping Mall manager observes that the rise in price causes demand for shirts to fall from 500 shirts per week to 300 shirts per week. What is the price elasticity of demand for shirts? (use Mid Point Method)
(a) 0.916
(b) 1.5
(c) 1
(d) 1.667

Q.10. The basic distinction between M1 and M2 is in the:
(a) Treatment of post office savings deposits
(b) Treatment of time deposits of banks
(c) Treatment of saving deposits of banks
(d) Treatment of currency

Q.11. After 1950, commercial banks in India were nationalized:
(a) Once in 1969
(b) Twice in 1969 and 1980
(c) Thrice in 1969, 1980 and 1991
(d) None of the above

Q.12. In order to increase money supply in the country, the RBI may:
(a) Reduce CRR
(b) Increase CRR
(c) Sell securities in the open market
(d) Increase Bank Rate

Q.13. Monetary Policy is given by:
(a) RBI
(b) Planning Commission
(c) Finance Minister
(d) Monetary Bank of India

Q.14. Which of the following is incorrect?
(a) The shape of the average cost and marginal cost curve is ‘U’
(b) The AR and MR curves of a firm under perfect competition are parallel to X-axis.
(c) At Equilibrium AR=MR
(d) At Equilibrium MC=MR

Q.15. The slope of indifference curve indicates:
(a) Price ratio between two commodities
(b) Marginal rate of substitution
(c) Factor substitution
(d) Level of indifference


If the quantity of Banana demanded is 100 kg when price is Rs 40 per kg and quantity demanded is 50 kg, when price per kg of Banana is Rs. 60. Find price elasticity of demand using arc-elasticity method.
(a) 2.5
(b) 1.8
(c) (-) 1.66
(d) (-) 2.2


Suppose Mohan & Co. produces 10 units of output and incurs Rs. 30 per unit of variable cost and Rs. 5 per unit of fixed cost. In this case, total cost is:
(a) Rs. 300
(b) Rs. 35
(c) Rs. 305
(d) Rs. 350

Q.18. A condition needed for a perfectly competitive industry to exist is that:
(a) Buyers are able to influence the price of the commodity
(b) Any units of commodity are considered by buyers to be different
(c) Buyer discriminates in their purchases based on non-price factors.
(d) There are no obstacles to the free mobility of resources.


If the price of petrol rises by 25% and demand for car falls by 40% then, cross elasticity between petrol and car is:
(a) -1.6
(b) 1.6
(c) -2.6
(d) 2.6

Q.20. Which of the following statements is correct?
(a) Economic laws are mere statement of tendencies
(b) Economics laws are as exact as physical laws
(c) Economics laws are permanent
(d) All of the above

Q.21. If after selling 10 units, a seller realises Rs. 12, 000 and after selling 15 units he realises Rs. 20, 000 what is the marginal revenue here?
(a) Rs. 1500
(b) Rs. 1600
(c) Rs. 8000
(d) Rs. 2000

Q.22. Under which market structure, the control of firm over price is nil?
(a) Perfect competition
(b) Monopoly
(c) Oligopoly
(d) Monopolistic Competition


If as a result of 80 percent increase in all inputs, the output increases by 25 percent, this is a case of:
(a) Increasing return to scale
(b) Decreasing return to factor
(c) Decreasing returns to scale
(d) Diminishing return to factor

Q.24. When marginal product is negative, then total product is:
(a) Maximum
(b) Decreasing
(c) Constant
(d) None of the above

Q.25. In the long run, a firm in monopolistic competition:
(a) Always earns super profits
(b) Incurs losses
(c) Earns normal profit only
(d) May earn normal profits, super normal profits or incur losses.

Q.26. Assume that when price is Rs.40 quantity demanded is 9 units, and when price is Rs. 38, quantity demanded is 10 units. Based on this information, what is the marginal revenue resulting from an increase in output from 9 units to 10 units?
(a) Rs.20
(b) Rs.40
(c) Rs.38
(d) Rs.1


Suppose a firm is producing at level of output, such that MR>MC what should be the firm do to maximise profit?
(a) The firm should increase output
(b) The firm should do nothing
(c) The firm should hire less labour
(d) The firm should decrease price

Q.28. Marginal Revenue is equal to
(a) Change in quantity, divided by the change in price
(b) Change in price divided by change in output
(c) The change in PxQ due to a one unit change in output
(d) None of above


Suppose that an owner is earning total revenue of Rs.1,00,000 and is increasing explicit cost of Rs.60,000. If the owner could work for another company for Rs.30,000 a year, we would conclude that:
(a) The firm is earning economic profit or Rs. 10,000
(b) The firm is earning accounting profit or Rs. 40,000
(c) The firm is earning economic profit of Rs. 40,000
(d) Both (a) and (b)

Q.30. Which is not the essential condition of pure competition?
(a) Large number of buyers and sellers
(b) Homogeneous product
(c) Freedom of entry
(d) Perfect knowledge among buyers and sellers


What is the shape of AR curve faced by a firm under perfect competition?
(a) Horizontal
(b) Vertical
(c) Positively sloped
(d) Negatively sloped

Q.32. Which of the following is the condition for equilibrium of a firm?
(a) AC = AR
(b) MR = AR
(c) MC = MR
(d) AC = MR


___ measure estimates the number of persons who may be said to be chronically unemployed.
(a) Usual Status
(b) Current Weekly Status
(c) Current Daily Status
(d) Current Yearly Status

Q.34. When due to introduction of new equipments, some workers tend to be replaced by equipments; their unemployment is termed as ___.
(a) Structural
(b) Seasonal
(c) Frictional
(d) Technological

Q.35. Every ___ person in the world is an Indian
(a) CWS
(b) Usual Status
(c) CDS
(d) CMS

Q.36. ___ measures generally gives the lowest estimate of unemployment.
(a) CWS
(b) Usual Status
(c) CDS
(d) CMS

Q.37. Which of the following statements is correct?
(a) Countries which are industrially well-developed generally have higher per-capital income than countries which are not.
(b) India is a capital surplus economy
(c) Agriculture sector need not depend upon industrial sector for its growth
(d) None of the above

Q.38. Mahalanobis model stressed upon the establishment of:
(a) Consumer goods industries
(b) Export oriented industries
(c) Agro-based industries
(d) Capital and basic goods industries

Q.39. If income elasticity of the household for good X is 3 then it is a:
(a) Normal Good
(b) Necessity Good
(c) Luxury Good
(d) Inferior Good

Q.40. Which of the following is not included in foreign exchange reserves?
(a) Foreign currency assets held by RBI
(b) Gold holding of the RBI
(c) Special Drawings Rights
(d) None of the above

Q.41. Based II framework is for:
(a) Banks
(b) Insurance Companies
(c) RBI
(d) None of the above

Q.42. The total area under the demand curve of good measures:
(a) Marginal utility
(b) Total utility
(c) Consumers surplus
(d) Producer surplus

Q.43. Which of the following is not a quantitative measure of credit control?
(a) Bank rate policy
(b) Open market operation
(c) Margin requirement
(d) Variable reserve requirement


Integration of the domestic economy with the world economy is called ___.
(a) Liberalisation
(b) Globalisation
(c) Privatisation
(d) Disinvestment

Q.45. Which of the following is not an indirect Tax Reform?
(a) Reducing the peak rate of custom duties
(b) Rectifying anomalies like inverted duty structure
(c) Introduction of VAT for achieving harmonized taxation regime
(d) The tax rate on foreign companies has also been reduced from 55% to 40%

Q.46. Occupational structure refers to the:
(a) Number of workers living in a country.
(b) Size of working population in the industrial sector
(c) Distribution of working population among different occupations
(d) Nature of different occupation in the economy

Q.47. Which of the following is not a characteristic of a price taker?
(a) Negatively Sloped Demand Curve
(b) TR = P x Q
(c) AR = Price
(d) MR = AR

Q.48. All are features of monopoly except:
(a) There is a single seller
(b) The firm is a price taker
(c) The firm produces a unique product
(d) The existence of some advertising

Q.49. A monopolist is able to maximize his profits when:
(a) His output is maximum
(b) He charges a higher price
(c) His average cost is minimum
(d) His marginal cost is equal to marginal revenue

Q.50. ___ is the difference between total receipts and total expenditure
(a) Fiscal Deficit
(b) Budget Deficit
(c) Capital Deficit
(d) Revenue Deficit

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