In the name of ALLAH, the most beneficient, the most merciful

## Economics (ECO401)

Multiple Choice Questions (MCQs)

## Objective Questions

### Question

If the income elasticity of demand for tea is 0.4, a 10% increase in consumer's income will lead to a _________ in the quantity of tea demanded.

1. 40 percent increase
2. 40 percent decrease
3. 4 percent increase
4. 0.4 percent increase

### Question

In a perfectly competitive market:

1. Firms can freely enter and exit
2. Firms sell a differentiated product
3. Transaction costs are high
4. All of the given

### Question

A Demand Curve is price inelastic when changes in demand are:

1. Greater than zero
2. Equal than those in price
3. Proportionately smaller than those in price
4. Proportionately greater than those in price

### Question

Rabia decides to look after her baby at home rather than going out with her friends in a park. His dilemma is an example of:

1. Opportunity cost
2. Marginal analysis
3. Allocative efficiency
4. The economic perspective

### Question

If the quantity demanded of mangoes exceeds the quantity supplied of mangoes:

1. There is a surplus of mangoes
2. Market forces will cause the price to fall
3. Market forces will cause the price to rise
4. The market is in equilibrium

### Question

The cross-price elasticity of demand of complementary goods is:

1. Less than 0
2. Equal to 0
3. Greater than 0
4. Between 0 and 1

### Question

It is expected that the sign of cross price elasticity of demand between two complementary goods would be:

1. Positive
2. Negative
3. Zero
4. Ambiguous

### Question

ABC Company is running a business of car manufacturing and finds sharp increase in prices of spare parts which in turn increases cost of manufacturing cars. This increase in cost of production will:

1. Shift demand curve for cars to the right
2. Shift demand curve for cars to the left
3. Shift supply curve for cars to the left
4. Bring no change in demand or supply curves for cars

### Question

There will be excess supply in the market due to:

1. Price ceiling
2. Price rationing
3. Price floor
4. All of the given

### Question

Which of the following might be considered to be a characteristic of a planned economy?

1. Government influence
2. Consumer sovereignty
3. Forbiddance of interest
4. Even income distribution

### Question

If marginal physical product is equal to average physical product:

1. Total revenue will fall
2. Average variable costs will fall
3. The total physical product will fall
4. The average physical product will not change

### Question

In a free market economy, resources are allocated on the basis of:

2. A central planning authority
3. Consumer preferences
4. The level of profits of firms

### Question

Suppose that as the price of apples falls the income effect causes consumers to buy fewer apples. We can conclude that apple is:

1. An inferior good
2. Nasty tasting
3. A normal good
4. Expensive

### Question

If sugar and tea are considered to be perfect complements, than a decrease in price of sugar will lead to:

1. Decrease in quantity demanded of sugar
2. Decrease in quantity demanded of tea
3. Increase in quantity demanded of tea
4. Increase in quantity supplied of tea

### Question

Which of the following factors would cause leftward shift in supply curve for bicycles?

1. Decrease in wages
2. Increase in prices of inputs
3. Decrease in prices of inputs
4. Use of latest technology in production of bicycles

### Question

Suppose a firm produces 20 units of output and incurs Rs.40 in average variable cost and Rs.8 in average fixed cost, average total cost is:

1. 40
2. 35
3. 48
4. 60

### Question

Suppose a profit maximizing firm sells 100 units of output. The total revenue function is TR =500q – 2q2. What is the value of marginal revenue?

1. 100
2. 400
3. -400
4. -100

### Question

Which of the following is TRUE for an entrepreneur?

1. An innovator
2. A risk taker
3. Someone who brings resources together and produces a product
4. All of the given

### Question

Asifa while addressing the young parliamentarians said that rising inflation in Pakistan was due to the high interest rates. Which category her statement falls in?

1. Normative
2. Positive
3. Negative
4. None of the given

### Question

“Each firm produces an identical product and there is freedom of entry and exit”. This is TRUE for which of the following market structures?

1. For Monopoly
2. For Oligopoly
3. For Perfect competition
4. For Monopolistic competition

### Question

Revenue is equal to price times:

1. Quantity
2. Quantity minus total cost
3. Quantity minus average cost
4. Quantity minus marginal cost

### Question

Ali has 1 acre land in Bahawalpur. He grows wheat on this land by employing 10 workers. To get maximum output, he decides to increase number of workers. The law of diminishing returns states that as more workers are employed to grow wheat on 1 acre land:

1. Marginal utility of wheat falls
2. The total physical product of wheat falls
3. The marginal physical product of wheat falls
4. The marginal physical product of wheat increases

### Question

Diminishing marginal returns implies:

1. Decreasing marginal costs
2. Increasing marginal costs
3. Decreasing average variable costs
4. Decreasing average fixed costs

### Question

When government sets the price of a good less than the equilibrium price of a good, then there will be:

1. Surplus of the good
2. Shortage of the good
3. An increase in the demand for the good
4. A decrease in the supply of the good

### Question

Mohsin Malik has been updated by his partner that this month Rs. 65,000 have been paid to acquire new machinery directly needed to match the rising demand. Which of the following they have paid for?

1. Labor
2. Capital
3. Land
4. Entrepreneurship

### Question

If price of MP3 players rises and as a result, the demand for headphones decreases, then one can say that MP3 players and headphones are:

1. Normal goods
2. Substitutes
3. Complements
4. Inferior goods

### Question

Suppose Fauji Fertilizer Company Limited produces 4500 bags of Sona Urea and sells each bag at a price of Rs. 350. What is the total revenue this firm gets by selling 4500 bags?

1. 128500
2. 150000
3. 1575000
4. 1636000

### Question

Which of the following is a characteristic of a mixed economy?

1. Resources are governed by both government and individuals.
2. It utilizes the characteristics of both market economy and planned economy.
3. People are free to make their decisions and government controls the defense.
4. All of the given

### Question

Economics is different from other social sciences because it is primarily concerned with the study of ________.

1. Limited resources
2. Scarcity
3. Social behavior
4. Biological behavior

### Question

Suppose Ali is consuming 20 units of Apples and 10 units of bananas with his given income. Suddenly his level of income increases and he starts consuming more of both goods. For Ali, both goods are:

1. Normal Goods
2. Substitutes
3. Complements
4. Giffen Goods

### Question

The branch of economics that studies the entire economy, such topics as aggregate production, unemployment and inflation is called:

1. Managerial economics
2. Macro economics
3. Micro economics
4. Financial economics

### Question

Salman makes a plan to see movie with his friends. The cost of ticket is Rs. 300. If he will go, he will have to forego Rs. 500 that otherwise he will get by doing work at that time. The opportunity cost of watching movie is:

1. Rs.350
2. Rs. 500
3. Rs. 850
4. Rs.150

### Question

Arif decides to work for an extra hour rather than playing cricket with his friends. He gets Rs. 500 for an extra hour. His opportunity cost of working for an extra hour is:

1. Rs. 500
2. Pleasure that he would have received from playing cricket
3. Rs.500 minus pleasure that he would have received from playing cricket
4. Undetermined

### Question

Production possibility frontier analysis assumes that resources:

1. Increase with production
2. Are saved for emergency use
3. Are used to produce thousands of goods
4. Are used in a technically efficient way

### Question

The percentage change in quantity demanded given a percentage change in consumer's income is known as:

1. Price elasticity of demand
2. Income elasticity of demand
3. Supply price elasticity
4. Cross price elasticity

### Question

If a 2% rise in consumer’s incomes causes a 4% rise in product’s demand, the income elasticity of demand for the product will be:

1. 0.5
2. 1.5
3. 2
4. 2.5

### Question

Which best expresses the law of demand?

1. A higher price reduces demand
2. A lower price reduces demand
3. A higher price reduces quantity demanded
4. A lower price shifts the demand curve to the right

### Question

Marginal social cost is the change in social costs caused by:

1. A unit change in input
2. A unit change in fixed cost
3. A unit change in variable cost
4. A unit change in output

### Question

The demand for butter is downward-sloping. The price of butter suddenly rises from Rs. 160 per kg to Rs. 180 per kg. This will cause:

1. Demand curve of butter to shift to the right
2. Demand curve of butter to shift to the left
3. Quantity demanded of butter to increase
4. Quantity demanded of butter to decrease

### Question

Measurement of elasticites is made in percentage terms because:

1. It is easy to calculate
2. The resulting measure is unit free
3. It gives a more accurate answer
4. The answer is always negative that way

### Question

Mujtaba has paid Rs. 75000 as rent last month which in his opinion has increased slightly as compared to previous months. Which of the following he has paid for?

1. Labor
2. Capital
3. Land
4. Entrepreneurship

### Question

If a good has income elasticity of demand equal to 1/2, the good is:

1. Normal good (but not a luxury)
2. An inferior good
3. Luxury good
4. A Giffen good

### Question

During exams, Ali is studying for two hours a day and decides to spend an extra hour for better performance. The marginal benefit is the benefit that he gets from studying:

1. All three hours
2. An extra hour
3. Two hours
4. Four hours

### Question

An increase in the total output of a country over time is called:

1. Inflation
2. Economic growth
3. Economic development
4. Unemployment

### Question

Which of the following is true about the market mechanism?

1. Works through central planning by government
2. Eliminates market failures created by government
3. Inefficient means of communicating consumer demand
4. Prices serve as a means of communication between consumers and producers

### Question

Suppose we find that the cross-price elasticity of demand for two products is a negative number. We know that the two goods are:

1. Normal goods
2. Inferior goods
3. Substitutes
4. Complements

### Question

A Higher demand for computers will ________ of computers.

1. Increase both equilibrium price and equilibrium quantity
2. Decrease both equilibrium price and equilibrium quantity
3. Increase equilibrium price and decrease equilibrium quantity
4. Decrease equilibrium price and increase equilibrium quantity

### Question

The price elasticity of demand measures the responsiveness of quantity demanded to:

1. Quantity demanded
2. Quantity supplied
3. Price
4. Output

### Question

Demand is said to be ________ when the elasticity of demand is less than 1.

1. Increasing
2. Decreasing
3. Elastic
4. Inelastic

### Question

Demand is elastic when the elasticity of demand is:

1. Greater than 0
2. Greater than 1
3. Less than 1
4. Less than 0

### Question

“Q= a – b P” represents equation of:

1. Supply
2. Demand
3. Labor supply
4. Budget line

### Question

Zafar Iqbal stated in his opening note at University of Economics that food prices should be controlled for a comfortable living. Which category his statement falls in?

1. Normative
2. Positive
3. Negative
4. None of the given

### Question

Accounts office of Z&X corporations has paid Rs.250000 on account of profit in the month of August 2011. Which of the following the accounts office has paid for?

1. Labor
2. Capital
3. Land
4. Entrepreneurship

### Question

When the price of wheat rises by 10%, the quantity of wheat purchased falls by 4%. This shows that the demand for wheat is:

1. Perfectly elastic
2. Unit elastic
3. Price elastic
4. Price inelastic

### Question

If consumers’ incomes remain constant, then demand for product Y will:

1. Necessarily remain unchanged
2. Shift to the right if Y is a complementary good
3. Shift to the right if Y is a normal good
4. Shift to the right if Y is an inferior good

### Question

If the price of a good X is increased by 15% and its quantity demanded falls by 25%, the price elasticity of demand is:

1. Price elastic
2. Price inelastic
3. Unit price elastic
4. Normal

### Question

If quantity demanded of videocassette players decreases by 15% as a result of 10% increase in its price, then one can conclude that demand for videocassette players is:

1. Elastic
2. Inelastic
3. Perfectly elastic
4. Perfectly inelastic

### Question

A normative economic statement is a statement:

1. of fact
2. Used to test economic theory
3. Of what ought to be, not what is
4. Of what will occur if certain assumptions are true

### Question

If demand for automobiles increases and the supply curve do not shift then result will be:

1. No change in price and quantity of automobiles
2. Higher price and lower quantity of automobiles
3. Higher price and more quantity of automobiles
4. Higher price and no change in quantity of automobiles

### Question

Arifa in her recent address in National assembly said that poverty should be reduced in Pakistan. Which category her statement falls in?

1. Normative
2. Positive
3. Negative
4. None of the given

### Question

If there is a price ceiling, there will be:

1. Shortages
2. Surpluses
3. Equilibrium
4. Decrease in production

### Question

If the price of a good X is increased by 40% and its quantity demanded falls by 10%, the price elasticity of demand is:

1. Price elastic
2. Price inelastic
3. Unit price elastic
4. Normal

### Question

The opportunity cost of an action is:

1. Same for everyone
2. The value of the next best alternative
3. The undesirable aspects of that action
4. The average amount of unhappiness experienced by everyone involved

### Question

If the current market price is above the market clearing level. We would expect:

1. A shortage to accumulate
2. A surplus to accumulate
3. Upward pressure on the current market price
4. Lower production during the next time period

### Question

The process by which we limit the supply or amount of some economic factor which is scarcely available is called:

1. Rationing
2. Bundling
3. Price floor
4. Price ceiling

### Question

When the price elasticity of demand for a good is greater than 1, we say that the demand is:

1. Increasing
2. Decreasing
3. Elastic
4. Inelastic

### Question

Assume that the current market price is above the market clearing level. We would expect:

1. A shortage to accumulate
2. Downward pressure on the current market price
3. Upward pressure on the current market price
4. Lower production during the next time period

### Question

When the price for entry tickets for parks decrease, families tend to spend more time at parks instead at home. This best reflects:

1. Diminishing marginal utility
2. The income effect
3. The rationing function of markets
4. The substitution effect

### Question

Atif Khan, Young minister for agriculture, has updated in a talk show that rise in food prices is due to the rising oil prices. Which category his statement falls in?

1. Normative
2. Positive
3. Negative
4. None of the given

### Question

If the price elasticity of demand for beans is estimated to be -0.4, then a 20% increase in price will decrease the quantity demanded by:

1. 14%
2. 8%
3. 16%
4. 20%

### Question

When producers are unable to meet market demand for the product, this results as:

1. Surplus of goods
2. Market failure
3. Monopoly
4. Shortage of good

### Question

Those who hold the Classical view of the labour market are likely to believe that:

1. Monetary, but not fiscal policy will have an effect on output and employment
2. Fiscal but not monetary policy will have an effect on output and employment.
3. Both monetary and fiscal policy will have an effect on output and employment.
4. Neither monetary nor fiscal policy will have an effect on output and employment.

### Question

The oligopoly model that predicts that oligopoly prices will tend to be very rigid is the ________ model.

1. Cournot
2. Stackelberg
3. Dominant firm
4. kinked demand curve

### Question

What will happen if exchange rate decreases from $1 = Pak Rs. 85 to$1 = Pak Rs. 65?

1. It will reduce imports of Pakistan.
2. Its imports and exports will remain unchanged.
3. It will decrease exports of Pakistan.
4. It will increase exports of Pakistan.

### Question

Suppose a firm hires five workers and offers them to pay Rs. 350 for 6 hours. Later on, firm decides to increase working hours instead of hiring new workers. As working hours increase, the wage rate:

1. Increases
2. Decreases
3. Remains unchanged
4. First decreases then increases

### Question

What would result from a depreciation of the pound on the foreign exchange market?

1. An increase in the price of imported computers.
2. A fall in the purchasing power of US tourists in London.
3. A fall in the price of imported computers.
4. An increase in the purchasing power of UK tourists overseas.

### Question

Inverse relationship between the inflation rate and the unemployment rate is explained by:

1. Aggregate demand curve.
3. Phillips Curve.
4. Okun law.

### Question

The gold standard was an example of what kind of exchange-rate system?

1. A freely floating exchange rate
2. A managed floating exchange rate
3. A fixed exchange rate
4. A non-convertible exchange rate

### Question

Falling inflation means that price level is rising at a(n):

1. Constant Rate.
2. Increasing rate.
3. Decreasing rate.
4. Fluctuating rate.

### Question

Which of the following is NOT a public good?

1. Street lights
2. Electronics
3. Knowledge
4. National security

### Question

A good whose consumption increases due to increase in income is categorized as:

1. Inferior good
2. Giffen good
3. Superior good
4. Normal good

### Question

Suppose quantity demanded of chicken increases by 5 percent in response to 2 percent increase in price of beef. The cross-price elasticity of demand for chicken with respect to price of beef is:

1. +2.5
2. -2.5
3. +0.25
4. -0.25

### Question

The demand curve for eggs is downward-sloping. Suddenly the price of eggs increases from Rs.80/- per dozen to Rs.100/- per dozen. This will cause:

1. The demand curve for eggs to shift leftward
2. Quantity demanded of eggs to decrease
3. The demand curve for eggs to shift rightward
4. Quantity demanded of eggs to increase

### Question

A market is said to be in equilibrium when:

1. Supply equals Price
2. There is upward pressure on price
3. There is downward pressure on price
4. Quantity demanded is equal to quantity supplied

### Question

The demand for books is expressed as: Qd = 100 - P The supply of books is expressed as: Qs = 4P Refer to the above scenario, the equilibrium price of books is:

1. Rs. 15
2. Rs. 20
3. Rs. 23
4. Rs. 25

### Question

When we study market equilibrium, the primary influencing variable on production and purchasing decisions is:

1. Price
2. Cost of production
3. The overall state of the economy
4. Consumer’s income

### Question

If one firm increases its price, in the kinked demand curve model then:

1. Other firms will reduce their price.
2. Other firms will compete on a non-price basis.
3. Other firms will not increase their price.
4. Other firms will increase their output level.

### Question

The socially optimal level of price and quantity is determined where:

1. Marginal social benefit curve intersects marginal social cost curve.
2. Marginal social benefit curve intersects marginal private benefit curve.
3. Marginal social benefit curve intersects marginal private cost curve.
4. Marginal private benefit curves intersects marginal social cost curve.

### Question

For a firm buying labor competitively, the marginal input cost is equal to the:

1. Wage
2. Interest rate
3. Price of output
4. cost of raw materials

### Question

Organizations of independent firms, producing similar products, that work together to raise prices and restrict output, are a situation of:

1. Cartels
2. Perfect competition
3. Optimal output mix
4. Price ceiling

### Question

Which of the following is not a stock variable?

1. Government debt
2. The labor force
3. The amount of money held by the public
4. Inventory investment

### Question

Suppose if investment rises by Rs 100 billion at each price level. If the value of the multiplier is 4, what is the amount of change in real GDP demanded at each price level?

1. 25
2. 50
3. 400
4. 1000

### Question

Microeconomics is the branch of economics that deals with which of the following?

1. Individual consumers.
2. Individual firms and investors.
3. Unemployment and interest rates.
4. Individual consumers, individual firms and investors.

### Question

Suppose a teacher organizes a study group by reserving a meeting room, compiling study materials and attracting students. The students would most likely be which of the following factors of production?

1. Labor
2. Land
3. Capital
4. Entrepreneurship

### Question

Sultan is running a logistics business and provides logistics services to the local business community. For his company, truck falls in the category of ________.

1. Labor
2. Capital
3. Land
4. Entrepreneurship

### Question

Which of the following is NOT true about macroeconomics?

1. The study of the aggregate level of economic activity.
2. The study of the economic behavior of individual decision-making units such as consumers, resource owners, and business firms.
3. The study of the cause of unemployment.
4. The study of the cause of inflation.

### Question

Ghani noticed a new entry of Rs. 110000 under the head of wages in his books of accounts. Which of the following his accountant must have paid to?

1. Labor
2. Capital
3. Land
4. Entrepreneurship

### Question

Saqib is planning to start his own business. Initial cost that has to be incurred is Rs. 50,000. But to do so, he has to quit a job which pays Rs. 120,000 a year. His opportunity cost of starting business is:

1. Rs. 120,000
2. Rs. 50,000
3. Rs. 80,000
4. Undetermined

### Question

If there is an increase in the long term economic growth then production possibility frontier will:

1. Shift inward
2. Shift outward
3. Remain the same
4. Move downward on the same curve

### Question

Which of the following defines the opportunity cost?

1. Cost measured only in rupees
2. Cost of producing the goods
3. Cost of producing one more unit of good
4. Cost of next best alternative forgone

### Question

The production possibility frontier (PPF) shows all combinations of goods that:

1. Society most desires.
2. Lie outside the curve.
3. Reflect full production.
4. An economy can produce with all available resources.

### Question

If the quantity demanded of computers exceeds the quantity supplied of computers:

1. Market forces will cause the price to rise.
2. The market is in equilibrium.
3. There is a surplus of computers.
4. Market forces will cause the price to fall.

### Question

If the cost of parts of automobiles falls, then:

1. The demand curve for automobiles shifts to the right.
2. The supply curve for automobiles shifts to the right.
3. The demand curve for automobiles shifts to the left.
4. The supply curve for automobiles shifts to the left.

### Question

The effect of a change in income on the quantity of the good consumed is called the:

1. Income effect
2. Budget effect
3. Substitution effect
4. Real income effect

### Question

The demand for apples is expressed as: Qd = 80 - P The supply of apples is expressed as: Qs = 3P Refer to the above scenario, the equilibrium price of apples is:

1. Rs. 10
2. Rs. 15
3. Rs. 20
4. Rs. 25

### Question

Other things remaining same, when raw material costs increase of an industry then:

1. The supply curve shifts to the left.
2. The supply curve shifts to the right.
3. The demand curve shifts to the left.
4. The demand curve shifts to the right.

### Question

What would cause the supply curve of wheat to shift to the right?

1. An increase in the prices of inputs
2. A decrease in the number of wheat growers
3. An increase in wages paid to agricultural workers
4. Technological improvement which lowers the costs of production

### Question

When government sets the price of a good and that price is below the equilibrium price, the result will be:

1. A surplus of the good
2. A shortage of the good
3. An increase in the demand for the good
4. A decrease in the supply of the good

### Question

If government imposes a price ceiling on wheat, which of the following will occur in the market for wheat?

1. There will be excess demand for wheat.
2. There will be excess supply of wheat.
3. The demand curve for wheat will shift leftward.
4. The supply curve for wheat will shift rightward.

### Question

If the price of sugar rises from Rs. 70 to Rs. 72 and quantity demanded decreases by 20%. We can conclude that:

1. Demand is inelastic.
2. The elasticity of demand is 2.
3. Total revenue will decrease.
4. Demand is unit elastic.

### Question

If the income elasticity of demand for bread is 0.4, a 10% increase in consumer income will lead to a ________ in the quantity of bread demanded.

1. 40% increase
2. 40% decrease
3. 4% increase
4. 0.4% increase

### Question

Suppose supply of agricultural products is price inelastic and government decides to increase taxes on agricultural products. More of the tax burden in this case would fall on:

1. Producers
2. Consumers
3. Government
4. Both producers and consumers

### Question

If Nestle Company has elastic demand for Nestle juices, then increase in price of Nestle juices will:

1. Increase total revenue.
2. Decrease total revenue.
3. Bring no change in total revenue.
4. Decrease marginal revenue.

### Question

If a good is having inelastic demand then if price rises:

1. Quantity demanded of good rises
2. Quantity supplied of good falls
3. Total revenue of good rises
4. Total revenue of good falls

### Question

When the cross-price elasticity of demand for two goods is less than zero then the goods are ________ goods.

1. Complementary
2. Substitute
3. Inferior
4. Giffen

### Question

If the cross price elasticity of demand between two products is +3.5, then:

1. One of the products is expensive and one is relatively inexpensive
2. One product is a normal good and the other is an inferior good
3. The two products are complements
4. The two products are substitutes

### Question

Suppose Ali derives total utility equals to 10 utils from the consumption of 1 bottle of Pepsi. When he consumes another bottle of Pepsi, he gets total utility equals 25 utils. His marginal utility in this case will be:

1. 2.5 utils
2. 15 utils
3. 25 utils
4. 35 utils

### Question

Which of the following shows the condition for consumer's equilibrium?

1. Marginal utility per dollar spent on each good being equalized across all goods.
2. The ratio of (marginal utility per unit of the good)/ (price per unit of the good) being equalized across all goods.
3. The ratio of marginal utilities being equated to the ratio of prices for all possible pairs of goods.
4. All of the given options.

### Question

The law of diminishing marginal utility indicates that the demand curve is:

1. Vertical
2. U shaped
3. Upward sloping
4. Downward sloping

### Question

The law of diminishing marginal utility states:

1. The supply curve slopes upward
2. The elasticity of demand is infinite
3. Your utility grows at a slower and slower rate as you consume more and more units of a good
4. Your utility grows at a slower and slower rate as you consume less units of a good

### Question

Suppose the total utility derived from first four units of a good consumed are 12, 22, 32, and 42 respectively. What is the marginal utility of the third unit?

1. 10
2. 13
3. 20
4. 33

### Question

Keeping other factors constant, if Asma drinks more and more bottles of coke, his marginal utility from coke will:

1. Diminish
2. Increase
3. Remain the same
4. First decrease then starts increasing

### Question

The total utility curve starts at the origin and reaches the peak when marginal utility is:

1. Zero
2. Maximum
3. Negative
4. Positive

### Question

All the insurance companies around the globe work under the principle of:

1. Law of zero numbers
2. Law of large numbers
3. Law of small numbers
4. Law of constant numbers

### Question

If there are 30 percent chances that machine will work well and 70 percent chances that it will not function well, then the odd ratio will be:

1. 2.333
2. 0.428
3. 0.40
4. 0.721

### Question

Which of the following is TRUE about the production function?

1. It relates inputs with output.
2. It generates a curve that is upward sloping.
3. It shows diminishing marginal product of an input.
4. All of the given

### Question

Ali initially started a small day care centre with only 10 children and one staff member. But he found that the cost per child is very high. He wants to expand the centre. Which of the following will happen when Ali expands the centre?

1. Economies of scale
2. Diseconomies of scale
3. Increasing returns to the labor inputs
4. Decreasing returns to the labor inputs

### Question

The total cost (TC) function is given as TC = 200 + 8Q. What will be the average total cost if 2 units of commodity are produced?

1. 20
2. 55
3. 108
4. 216

### Question

Suppose a profit maximizing firm gets total revenue of Rs. 15000 by selling 150 units of output. When it sells 250 units of output, total revenue becomes Rs. 35000. The marginal revenue in this case is:

1. 125
2. 200
3. 350
4. 400

### Question

In soap industry, all firms can freely enter or exit into the market and each firm is competing on the basis of product differentiation. In which market structure this industry is operating?

1. Monopoly
2. Oligopoly
3. Perfect Competition
4. Monopolistic Competition

### Question

Suppose that a farmer grows wheat and sells it to a baker for Rs.1, the baker makes bread and sells it to a store for Rs.2, and the store sells it to the customer for Rs.3. This transaction increases GDP by:

1. Rs.1
2. Rs.2
3. Rs.3
4. Rs.6

### Question

Final goods are:

1. Inferior goods only
2. For further processing
3. Perishable goods only
4. For Direct use by the consumers

### Question

In measurement of GDP, the problem of double counting is avoided by:

1. Using GDP deflator.
2. Adjusting the value of intermediate goods with prices.
3. Adjusting the value of only finished goods with prices.
4. Calculating value added at each stage of production.

### Question

Gross National Product (GNP) is:

1. Gross Domestic Product (GDP) minus depreciation.
2. Net National Product (NNP) plus depreciation.
3. National income discounted by the GDP deflator.
4. Income from foreign investments.

### Question

Suppose Gross Domestic Product (GDP) in 2007 equals Rs. 720,000. If the values of indirect taxes and depreciation allowance are Rs. 250,000 and Rs. 40,000 respectively, the value of net domestic product (NDP) is:

1. Rs.680, 000
2. Rs.470, 000
3. Rs.430, 000
4. Rs.510, 000