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CMAF-ECO-1&2

Total questions: 100

Worksheet time: 3hrs 30mins

Name
Class
Date
1.

Economics is primarily concerned with

a)

Unlimited resources and limited wants

b)

Limited resources and unlimited wants

c)

Unlimited resources and unlimited wants

d)

Limited resources and limited wants

2.

Economic wants are those wants which are

a)

Desirable only

b)

Socially approved

c)

Backed by purchasing power

d)

Morally acceptable

3.

The central problem of an economy arises because

a)

Population grows rapidly

b)

Resources are unevenly distributed

c)

Wants are unlimited and resources are scarce

d)

Technology is imperfect

4.

Which of the following is a production unit in an economy?

a)

Household

b)

Government

c)

Firm

d)

Consumer

5.

Consumption in economics refers to

a)

Purchase of all goods

b)

Use of goods for satisfaction of wants

c)

Production of goods

d)

Exchange of goods

6.

Buying a house for renting it out is treated as

a)

Consumption

b)

Social expenditure

c)

Investment

d)

Transfer payment

7.

Which factor of production coordinates other factors?

a)

Land

b)

Labour

c)

Capital

d)

Organisation

8.

Distribution in economics means

a)

Sharing of goods

b)

Sharing of income among factors

c)

Exchange of goods

d)

Consumption of goods

9.

Rent is the reward for

a)

Labour

b)

Capital

c)

Organisation

d)

Land

10.

Macro distribution refers to

a)

Pricing of factors

b)

National income sharing

c)

Individual income

d)

Firm-level distribution

11.

Wealth is best described as

a)

Flow over time

b)

Stock at a point of time

c)

Continuous income

d)

Periodic earnings

12.

Which of the following is NOT considered wealth in economics?

a)

Transferable goods

b)

Personal skills

c)

Machinery

d)

Buildings

13.

National wealth includes

a)

Government bonds held by citizens

b)

Private shares

c)

Public roads and bridges

d)

Personal savings

14.

Income differs from wealth because income is

a)

Stock

b)

Non-transferable

c)

Flow

d)

Permanent

15.

Production means

a)

Creation of matter

b)

Creation of utility

c)

Exchange of goods

d)

Consumption of goods

16.

Which of the following is NOT a factor of production?

a)

Land

b)

Labour

c)

Money

d)

Capital

17.

The Production Possibility Curve (PPC) shows

a)

Consumer preferences

b)

Maximum attainable combinations of goods

c)

Market demand

d)

Cost conditions

18.

The slope of PPC represents

a)

Marginal cost

b)

Opportunity cost

c)

Average cost

d)

Total cost

19.

A point inside the PPC indicates

a)

Economic growth

b)

Full employment

c)

Unemployment of resources

d)

Impossible combination

20.

A rightward shift of PPC indicates

a)

Inflation

b)

Economic growth

c)

Recession

d)

Unemployment

21.

Money is anything which

a)

Is issued by government

b)

Is legally approved

c)

Is generally accepted as medium of exchange

d)

Has intrinsic value

22.

Income of an individual refers to

a)

Total wealth

b)

Gross assets

c)

Flow of purchasing power

d)

Capital stock

23.

Saving is defined as

a)

Income + consumption

b)

Income − consumption

c)

Consumption − income

d)

Wealth − income

24.

Investment refers to

a)

Purchase of existing shares

b)

Increase in capital stock

c)

Saving of income

d)

Holding cash

25.

Real investment results in

a)

Transfer of ownership

b)

Increase in productive capacity

c)

Change in income only

d)

Price rise

26.

Net investment equals

a)

Gross investment + depreciation

b)

Gross investment − depreciation

c)

Savings − consumption

d)

Capital − income

27.

Demand in economics means

a)

Desire only

b)

Need only

c)

Desire backed by purchasing power

d)

Mere willingness

28.

Which is NOT a determinant of demand?

a)

Income

b)

Taste

c)

Cost of production

d)

Price of substitutes

29.

Demand for tea rises when

a)

Price of tea rises

b)

Price of coffee rises

c)

Income falls (tea is normal)

d)

Population decreases

30.

Law of demand shows relationship between

a)

Price and supply

b)

Income and demand

c)

Price and quantity demanded

d)

Cost and demand

31.

Market demand curve slopes downward because of

a)

Law of supply

b)

Law of diminishing marginal utility

c)

Increasing cost

d)

Scarcity of goods

32.

Giffen goods violate the law of demand because

a)

They are luxury goods

b)

Income effect outweighs substitution effect

c)

They have many substitutes

d)

Demand is elastic

33.

Veblen goods are demanded more due to

a)

Low price

b)

Inferior quality

c)

Prestige and status

d)

Necessity

34.

Cross demand refers to relationship between

a)

Price and quantity of same good

b)

Income and demand

c)

Price of one good and demand of another

d)

Supply and price

35.

Cross elasticity is positive in case of

a)

Complementary goods

b)

Substitute goods

c)

Inferior goods

d)

Giffen goods

36.

When price changes and other factors remain constant, it results in

a)

Increase in demand

b)

Decrease in demand

c)

Extension or contraction of demand

d)

Shift in demand curve

37.

Increase in income leads to decrease in demand of

a)

Normal goods

b)

Superior goods

c)

Inferior goods

d)

Luxury goods

38.

Price elasticity of demand greater than one indicates

a)

Inelastic demand

b)

Unitary demand

c)

Elastic demand

d)

Perfectly inelastic demand

39.

Demand for salt is generally

a)

Perfectly elastic

b)

Relatively elastic

c)

Perfectly inelastic

d)

Unitary elastic

40.

Total outlay method measures elasticity by using

a)

Marginal utility

b)

Total expenditure

c)

Marginal cost

d)

Average cost

41.

When price falls and total expenditure rises, demand is

a)

Inelastic

b)

Unitary elastic

c)

Elastic

d)

Perfectly inelastic

42.

Point elasticity measures elasticity at

a)

Two points

b)

Entire curve

c)

A particular point

d)

Average point

43.

Arc elasticity is used when

a)

Changes are very small

b)

Demand is constant

c)

Changes are large

d)

Price is fixed

44.

If MR is zero, price elasticity of demand is

a)

Zero

b)

Less than one

c)

Equal to one

d)

Infinite

45.

Consumer surplus is introduced by

a)

Robbins

b)

Marshall

c)

Samuelson

d)

Keynes

46.

Consumer surplus equals

a)

Market price – demand price

b)

Willing price – actual price

c)

Total utility – marginal utility

d)

Income – consumption

47.

Law of diminishing marginal utility states that

a)

Total utility decreases always

b)

Marginal utility increases continuously

c)

Marginal utility diminishes with increased consumption

d)

Utility remains constant

48.

When marginal utility becomes zero, total utility is

a)

Increasing

b)

Decreasing

c)

Maximum

d)

Negative

49.

Which is an exception to diminishing marginal utility?

a)

Necessaries

b)

Rare collections

c)

Inferior goods

d)

Normal goods

50.

Demand forecasting helps mainly in

a)

Fixing wages

b)

Production planning

c)

Distribution of income

d)

Taxation

51.

Supply means

a)

Total stock of goods

b)

Quantity offered for sale at a given price

c)

Total production

d)

Unsold goods

52.

Law of supply shows relationship between

a)

Price and demand

b)

Income and supply

c)

Price and quantity supplied

d)

Cost and output

53.

Supply curve slopes upward because

a)

Cost increases

b)

Profit motive

c)

Demand increases

d)

Marginal utility increases

54.

Which factor does NOT affect supply?

a)

Technology

b)

Input prices

c)

Consumer income

d)

Government policy

55.

Increase in subsidy leads to

a)

Decrease in supply

b)

No change in supply

c)

Increase in supply

d)

Fall in demand

56.

Supply of agricultural land is

a)

Perfectly elastic

b)

Relatively elastic

c)

Perfectly inelastic

d)

Unitary elastic

57.

Backward bending supply curve relates to

a)

Capital

b)

Labour

c)

Land

d)

Money

58.

Increase in supply due to factors other than price results in

a)

Extension of supply

b)

Contraction of supply

c)

Shift of supply curve

d)

Change in quantity supplied

59.

Equilibrium price is determined where

a)

Demand equals supply

b)

Supply exceeds demand

c)

Demand exceeds supply

d)

Cost equals revenue

60.

Excess demand leads to

a)

Fall in price

b)

Rise in price

c)

No change

d)

Fall in supply

61.

Perfect competition is characterised by

a)

Single seller

b)

Few sellers

c)

Many buyers and sellers

d)

Product differentiation

62.

Under perfect competition, firm is a

a)

Price maker

b)

Price leader

c)

Price taker

d)

Monopoly

63.

Monopoly exists when

a)

Many sellers

b)

Single seller

c)

Differentiated product

d)

Free entry

64.

Monopolistic competition involves

a)

Homogeneous products

b)

Single seller

c)

Product differentiation

d)

Government control

65.

Oligopoly market has

a)

One seller

b)

Two sellers only

c)

Few sellers

d)

Many sellers

66.

Duopoly refers to

a)

Two buyers

b)

Two sellers

c)

Two markets

d)

Two products

67.

Price discrimination means

a)

Same price to all

b)

Different prices in different markets

c)

Government pricing

d)

Cost-based pricing

68.

Price discrimination is possible when

a)

Market is competitive

b)

Goods are perishable

c)

Markets can be separated

d)

Costs are equal

69.

Dumping is an example of

a)

Uniform pricing

b)

Price discrimination

c)

Cost pricing

d)

Administered pricing

70.

Under monopoly, AR curve is

a)

Upward sloping

b)

Horizontal

c)

Downward sloping

d)

Vertical

71.

Under perfect competition, AR equals

a)

MR

b)

MC

c)

AC

d)

TC

72.

In monopolistic competition, firms earn normal profit in

a)

Short run

b)

Long run

c)

Always

d)

Never

73.

Excess supply results in

a)

Rise in price

b)

Fall in price

c)

Increase in demand

d)

Increase in supply

74.

Price elasticity under perfect competition is

a)

Zero

b)

Less than one

c)

One

d)

Infinite

75.

Demand curve of a firm under perfect competition is

a)

Downward sloping

b)

Vertical

c)

Horizontal

d)

Kinked

76.

In monopoly, demand curve and AR curve are

a)

Different

b)

Same

c)

Parallel

d)

Opposite

77.

Which market structure allows product differentiation?

a)

Perfect competition

b)

Monopoly

c)

Monopolistic competition

d)

Duopoly

78.

Kinked demand curve is associated with

a)

Monopoly

b)

Oligopoly

c)

Duopoly

d)

Perfect competition

79.

Under oligopoly, prices are

a)

Highly flexible

b)

Very unstable

c)

Rigid

d)

Determined by demand only

80.

Which market gives maximum consumer choice?

a)

Monopoly

b)

Perfect competition

c)

Monopolistic competition

d)

Duopoly

81.

Which market has free entry and exit?

a)

Monopoly

b)

Oligopoly

c)

Perfect competition

d)

Duopoly

82.

Price discrimination requires elasticity of demand to be

a)

Same in all markets

b)

Different in all markets

c)

Zero

d)

Infinite

83.

Which pricing policy maximises monopoly profit?

a)

Uniform pricing

b)

Average cost pricing

c)

Marginal cost pricing

d)

Discriminatory pricing

84.

Market equilibrium is stable when

a)

Demand > supply

b)

Supply > demand

c)

Price adjusts to excess demand or supply

d)

Price remains fixed

85.

Increase in demand with constant supply leads to

a)

Fall in price

b)

Rise in price

c)

Fall in quantity

d)

No change

86.

A firm earns supernormal profit in short run under

a)

Perfect competition

b)

Monopoly

c)

Monopolistic competition

d)

Both B and C

87.

Which market structure has close substitutes?

a)

Monopoly

b)

Perfect competition

c)

Monopolistic competition

d)

Duopoly

88.

Long run equilibrium under monopolistic competition yields

a)

Supernormal profit

b)

Loss

c)

Normal profit

d)

Zero output

89.

Which market has highest degree of competition?

a)

Monopoly

b)

Oligopoly

c)

Perfect competition

d)

Duopoly

90.

Demand curve under monopoly slopes downward because

a)

Many sellers

b)

No substitutes

c)

Market demand itself slopes downward

d)

Price control

91.

When demand and supply both increase equally, price

a)

Increases

b)

Decreases

c)

Remains unchanged

d)

Becomes zero

92.

Perfect competition assumes

a)

Product differentiation

b)

Selling cost

c)

Perfect knowledge

d)

Price rigidity

93.

Which market structure has highest selling cost?

a)

Monopoly

b)

Perfect competition

c)

Monopolistic competition

d)

Duopoly

94.

In duopoly, price is influenced mainly by

a)

Government

b)

Cost

c)

Rival firm’s actions

d)

Consumers

95.

Excess demand situation is also called

a)

Market surplus

b)

Shortage

c)

Equilibrium

d)

Stability

96.

Price discrimination is NOT possible when

a)

Transport cost exists

b)

Resale is possible

c)

Different markets exist

d)

Demand differs

97.

Which market structure gives price leadership?

a)

Monopoly

b)

Oligopoly

c)

Perfect competition

d)

Monopolistic competition

98.

In monopoly, marginal revenue is

a)

Greater than price

b)

Equal to price

c)

Less than price

d)

Zero always

99.

Which factor mainly differentiates monopolistic competition from perfect competition?

a)

Number of sellers

b)

Product differentiation

c)

Market demand

d)

Price elasticity

100.

In short run equilibrium of a competitive firm, profit is maximised when

a)

AR = AC

b)

MR = MC

c)

TR = TC

d)

Price = AC

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