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

Economics (ECO401)

Multiple Choice Questions (MCQs)

 

Objective Questions

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

Answer: 2 Chapter No. 1 

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.

Answer: 2 Chapter No. 1 

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

Answer: 1 Chapter No. 1 

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

Answer: 1 Chapter No. 1 

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.

Answer: 4 Chapter No. 1 

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

Answer: 4 Chapter No. 2 

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.

Answer: 4 Chapter No. 2 

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

Answer: 4 Chapter No. 2 

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

Answer: 2 Chapter No. 2 

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.

Answer: 1 Chapter No. 3 

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

Answer: 1 Chapter No. 3 

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.

Answer: 1 Chapter No. 3 

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.

Answer: 1 Chapter No. 4 

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

Answer: 3 Chapter No. 4 

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

Answer: 4 Chapter No. 4 

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

Answer: 4 Chapter No. 5 

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.

Answer: 1 Chapter No. 5 

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.

Answer: 1 Chapter No. 6 

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

Answer: 3 Chapter No. 6 

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

Answer: 3 Chapter No. 6 

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

Answer: 1 Chapter No. 6 

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.

Answer: 2 Chapter No. 6 

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

Answer: 1 Chapter No. 8 

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

Answer: 4 Chapter No. 8 

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

Answer: 2 Chapter No. 9 

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.

Answer: 4 Chapter No. 9 

Question

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

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

Answer: 4 Chapter No. 9 

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

Answer: 3 Chapter No. 9 

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

Answer: 1 Chapter No. 9 

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

Answer: 1 Chapter No. 9 

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

Answer: 1 Chapter No. 9 

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

Answer: 2 Chapter No. 10 

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

Answer: 2 Chapter No. 10 

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

Answer: 1 Chapter No. 13 

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

Answer: 1 Chapter No. 14 

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

Answer: 3 Chapter No. 16 

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

Answer: 2 Chapter No. 17 

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

Answer: 4 Chapter No. 18