Economics Quiz - 21

1. A firm will shut down its operations in the short run if
[A]It incur losses
[B]Fixed costs exceed its revenue
[C]Variable costs exceed its revenue
[D]Total revenue falls short of total cost


2. If the demand curve for product B shifts to the right as the price of product A declines, it can be concluded that
[A]A and B are substitute goods
[B]A and B are complementary goods
[C]A and B are not related goods
[D]A is a superior and B an inferior good


3. The demand function for a product is P = 20 – 2Q. If the current market price is Rs.10, what is the price elasticity of demand?
[A]-1
[B]-2
[C]1.5
[D]-3


4. Average productivity of labor for a firm is 25 when labor employed is 50 units. When labor employed is increased to 52 units, average productivity of labor declines to 24 units. At current input level the marginal productivity of labor is
[A]-1 unit
[B]-2 units
[C]1 unit
[D]2 units


5. Which of the following is false in first-degree price discrimination?
[A]The monopolist will be able to extract the entire consumer’s surplus
[B]The price of each unit will be different
[C]By following first degree price discrimination, the profit of the monopolist will be more than what he could otherwise earn at a single price
[D]The price of the first unit will be less than that of the subsequent units


6. Which of the following is not an example of an intermediate good?
[A]Cycle tyres bought by Hero Cycles Ltd.
[B]Fertilizer bought by a vegetable cultivator
[C]Art paper purchased by a painter
[D]A pack of sweets bought by Mr. Rajesh to celebrate his success with friends


7. In the recent monetary policy, the RBI Governor reduced the CRR from 4.75% to 4.50%. Which of the following sequences correctly shows the impact of the reduction in CRR?
I. Change in money supply.
II. Change in nominal interest rates.
III. Change in consumption and investment.
IV. Change in aggregate demand.
V. Change in real GDP and price level.
[A](I), (II), (III), (IV) and (V) above
[B](I), (II), (III), (V) and (IV) above
[C](I), (II), (IV), (V) and (III) above
[D](I), (V), (II), (III) and (IV) above


8. Three countries – A, B and C have same Production Possibility Frontier (PPF), but have different investment behavior. Country A made a gross investment equal to its depreciation. Country B spent most of its income on consumption. Country C invested heavily by sacrificing its current consumption. After 10 years which country will have a higher PPF?
[A]Country A
[B]Country B
[C]Country C
[D]Both (b) and (c) above


9. Immediately following a depression,
[A]Unemployment rate increases moderately
[B]Aggregate demand decreases further because of recession
[C]There will be rapid increase in wages but less than the increase in prices of goods and services
[D]The cost of production will gradually increase because of gradual increase in wages


10. An economy is said to be facing inflation with respect to a base year if the price index for the current year is
[A]Greater than 0 (i.e. positive)
[B]Greater than 100
[C]100
[D]Between 0 to 100


11. In which of the following markets, the demand curve faced by a firm will be least elastic?
[A]Perfectly competitive market
[B]Monopolistic market
[C]Monopoly
[D]Pure oligopoly


12. Total market value of all the final goods and services produced in a given period by factors of production located within a country is
[A]Gross National Product at market prices
[B]Gross Domestic Product at market prices
[C]Net National Product at market prices
[D]Gross National Product at factor cost


13. “The money payments which are not due to any current productive activity on the part of income receiver” is called
[A]Plan expenditure
[B]Transfer payments
[C]Consumption expenditure
[D]Past expenditure


14. The difference between M3 and M1 is
[A]Demand deposits
[B]Post office savings deposits
[C]Savings deposits
[D]Time deposits


15. The diagram of circular flow of income shows
I. Households providing firms with factors of production.
II. Income for factors of production flowing from households to firms.
III. Firms owning factors of production.
[A]Only (I) above
[B]Only (III) above
[C]Both (I) and (III) above
[D]Both (II) and (III) above