QB CH-1 Questions

Chapter 1 Question Bank

MEANING AND NATURE OF ECONOMICS

 

  1. Adam smith considered Economics as-
  • Science of Wealth
  • Science of Material Well-being
  • Science of Choice-making
  • Science of Growth and Development
  1. J B Say considered Economics as-
  • Science of Wealth
  • Science of Material Well-being
  • Science of Choice-making
  • Science of Growth and Development
  1. Which of these Economics did not consider Economics as Science of Wealth?
  • Adam Smith
  • J B Say
  • Alfred Marshall
  • All the above
  1. A C Pigou considered Economics as-
  • Science of Wealth
  • Science of Material Well-being
  • Science of Choice-making
  • Science of Growth and Development
  1. Economics = Study of Wealth + Study of Man. This definition of Economics is attributed to-
  • Adam Smith
  • Keynes
  • Alfred Marshall
  • A C pigou
  1. Which of the following Economists considered Economics as Science of Choice Making?
  • Lionel Robbins
  • Alfred Marshall
  • Adam Smith
  • Samuelson
  1. Find the Correct match-
  • An enquiry into the nature and causes of the wealth of nations: A C Pigou
  • Science which deals with Wealth: Alfred Marshall
  • Economics is the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses: Robbins
  • The range of our enquiry becomes restricted to that part of social welfare that can be brought directly or indirectly into relation with the measuring rode of money: Adam smith
  1. Consider the following and decided which, economy if any is without scarcity –
  • The pre-independent Indian economy, where most people were farmers
  • A mythical economy where income is distributed equally among its people
  • None of the above
  1. Scarcity in Economics is an –
  • Absolute Concept
  • Relative Concept
  • Irrelevant Concept
  • Not a Concept at all
  1. Resources are scarce in relation to –
  • Human Wants
  • Firm’s Profit Motive
  • Country’s Social Goals
  • All of the above
  1. Macro-Economics is the Study of behaviour of:
  • Multiple
  • Individual
  • Large
  • None of the above
  1. Macro-Economics is also called-
  • Price Theory
  • Income Theory
  • Irrelevant Theory
  • Development Theory
  1. The difference between Micro-Economics and Macro-Economics is:
  • Macro-Economics deals with the economics of individuals counties while Macro-Economics describes the functionings of the world economy.
  • Micro-Economics is concerned with the behaviour of individual entries like markets firm, etc. while Macro-economics, with the overall performance of the economy.
  • Macro-Economics is concerned with the behaviour of individual entities like markets, firm, etc. while micro-economics with the overall performance of the economy.
  • Micro-Economics is positive Economics while Macro-economics is Normative Economics.
  1. Which of the following is not a variable of Micro-Economics?
  • Equilibrium price in a market
  • Supply curve of individual firm
  • National income
  • Marginal utility of goods to Consumers
  1. Income Theory is the other name of-
  • Macro Economics
  • Micro Economics
  • Econometrics
  • Product pricing
  1. Which of the following is covered in Macro-Economics?
  • Product pricing
  • Consumer Behaviour
  • General Price Levels
  • Factor Pricing
  1. Which of the following is covered in Micro-Economics?
  • Balance of Trade and Payments
  • National Income and Output
  • Saving and Investment
  • Product Pricing
  1. State which of the following represents macro from the national point of view.
  • Stock Turnover Ratio of K Ltd.
  • Capital Output Ratio of Indian Industries
  • Debt Equity Ratio of M Ltd.
  • All the above
  1. Which of the following statements is correct?
  • Employment and Economic Growth are studied in Micro-Economics
  • Micro-Economics deals with balance of trade and payments
  • Economic Condition of a section of the people is studied in Micro Economics
  • External Value of Money is dealt with in Micro-Economics.
  1. Scientific Data / Relationships are –
  • Measurable
  • Quantifiable
  • Indeterminable
  • All of the above
  1. In Economics as a science, cause and effect between related factors-
  • Cannot be expressed
  • Cannot be identified
  • Can be identified but not always quantified
  • There is no cause-effect relationship at all in Economics
  1. In Economics, generalization of theories is not possible due to the fact that-
  • Resources are limited
  • There is no centre or Laboratory to conduct economic experiments
  • Human behaviour is unpredictable
  • There is no economist at all
  1. Art refers-
  • Knowledge only
  • Application of knowledge only
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. A ………. Science involves making value judgment, i.e. what is good and what is bad.
  • Positive
  • Normative
  • Economic
  • Systematic
  1. Which of the following statements is not true?
  • Positive Economics does not give value judgements
  • Positive Economics says only about the ends
  • A Normative statements includes Ethical values.
  • Normative Economics is concerned with welfare judgements.
  1. Which of the following statements is not true about positive and normative science?
  • Positive Economics says nothing about the ends
  • Positive Economics says nothing about the means
  • Positive Economics is concerned with moral judgements
  • A Normative statement involves Ethical values.
  1. Which of the following statements would you consider to be a Normative one?
  • Faster economic growth should result if an economy has a higher level of investment
  • Changing the level of interest rates is a better way of managing the economy than using taxation and government expenditure
  • Higher levels of unemployment will lead to higher levels of inflation
  • The average level of growth in the economy was faster in 2000s than 1980s
  1. An example of ‘Positive’ Economic Analysis would be
  • An analysis of the relationship between the price of goods and the quantity purchased
  • Determining how much income each person should be guaranteed
  • Determining the ‘fair’ price for goods
  • Deciding how to distribute the output of the economy
  1. Ram: My corn harvest this year is poor

Lakshman: Don’t worry. Price increase will compensate for the fall in quantity supplied

Krishna: Climate affects crop yields. Some years are bad, others are good.

Balram: The government ought to guarantee that our income will not fall

In this conversation, the normative statement is made by

  • Ram
  • Lakshman
  • Krishna
  • Balram
  1. Which of the these is true, if Economics is considered as a Positive Science?
  • Neutral between ends
  • Analysis human behaviour
  • Passes value judgements
  • Specifies what “ought to be”.
  1. Which of these is false, if Econonics is considered as a Normative Science?
  • Suggests socially desirable ends
  • Excludes human behaviour
  • Specifies what is good and reasonable
  • Specifies what “ought to be”.
  1. Which of these is True, if economics is considered as a Normative science?
  • Explains only cause and effect relationships
  • Includes human behaviour
  • Makes welfare propositions
  • Specifies “what is”, rather than “what ought to be”.
  1. Which of these economists were of the view that Economics is a Normative science?
  • Lionel robbins
  • Alfred Marshall
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Which of these economists were of the view that Economics is a positive science?
  • Lionel Robbins
  • Alfred Marshall
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. When we specify that Economists should not be concerned with whether an Individual should use his income towards purchasing cigarettes or rice, we consider Economics as-
  • Positive
  • Normative
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Economics is concerned only with study of economic decisions of individuals, and not with the moral or ethical aspects thereof. This statements considers Economics as-
  • Positive science
  • Normative science
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Economics has –
  • Positive aspects only.
  • Normative aspects only.
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. While laying down theories (like law of demand, law of supply), the ……… aspect of Economics is projected and brought out.
  • Positive
  • Normative
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. While dealing with issues like how the national income should be distributed, what be the wage rate, etc. the …… aspect of Economics is projected and brought out.
  • Positive
  • Normative
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Economic law are merely statements of economic tendencies. This statement is-
  • True
  • False
  • Partially true
  • Cannot be commented at all.
  1. Which of the following is true about economic laws?
  • Unconditional
  • Definite
  • Have universal applicability
  • Based on specific assumptions.
  1. Economic laws are-
  • Always quantifiable
  • Unconditonal
  • Universally valid
  • None of the above
  1. Economic laws are-
  • Rigid and absolute
  • Subject to specified assumptions
  • Mandatory
  • Strictly enforced by Government
  1. The methods to derive economic laws are –
  • Inductive method
  • Deductive method
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. In deductive method, first…… and then ……
  • First hypothesis is formulated, then such hypothesis is tested usin data.
  • First data is collected and analysed, and then a generalization is made.
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. ____ method is based on abstract reasoning, and subsequent verification with facts.
  • Inductive method
  • Deductive method
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. The other names for deductive method are –
  • Analytical method
  • Abstract method
  • A priori method
  • All of the above
  1. Which of the following steps relates only to deductive method in Economics?
  • Testing of hypothesis
  • Collection of data
  • Classification of data
  • Perception of the problem
  1. In Inductive method, first ….. and then …..
  • First hypothesis is formulated, then such hypothesis is tested using data.
  • First data is collected and analysed, and then a generalization is made.
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Inductive method is …….. based on the observation of particular facts.
  • Never
  • Seldom
  • Alternatively
  • always
  1. Researches in Macro-Economics, e.g. principle of acceleration describing the relationship between income and consumption, have been derived based on-
  • Inductive method
  • Deductive method
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. ___ method is based on initial analysis of facts, and subsequent reasoning therefrom.
  • Indictive method
  • Deductive method
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. For deriving economic laws, deductive and inductive methods are-
  • Mutually exclusive
  • Complementary
  • Conflicting
  • meaningless
  1. Human behaviour cannot always be observed, experimented and collected as data. This principle is recognised by-
  • Inductive method
  • Deductive method
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Facts observed in a certain situation cannot be generalized and universally applied. This principle is recognised by-
  • Inductive method
  • Deductive method
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. ____ method uses statistical techniques extensively to analyse data.
  • Inductive method
  • Deductive method
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. If there are adequate resources in an economy, then there is no economic problem at all. This statement is-
  • True
  • False
  • Partially true
  • Cannot be commented at all
  1. An economy achieves “Productive Efficiency” only when-
  • Resources are employed in their most highly valued uses
  • Best resources are employed
  • Total number of goods produced is greatest
  • Goods and services are produced at least cost and no resources are wasted.
  1. In deciding “How to produce”, the choice of appropriate production method depends on-
  • Availability of different factors of production
  • Prices of different factors of production
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Distribution and sharing of National Product relates to the problem of-
  • What to produce
  • How to produce
  • For whom to produce
  • How to provide for growth
  1. The issue of “for whom to produce” deals with
  • How to distribute and share the national product
  • Shares of different people in the total output of goods & services.
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Savings and Investment is compulsory for economic growth and development. This statement is-
  • True
  • False
  • Partially true
  • Cannot be commented at all.
  1. A capitalist Economy is also called as-
  • Free market economy
  • Command market economy
  • Controlled market economy
  • Regulated market economy
  1. In Capitalist Economies, the answer the fundamental questions-what, how, and for whom to produce, are obtained by-
  • Market forces of demand and supply
  • Government regulations
  • Cost benefit analysis
  • All of the above
  1. “Consumer Sovereignty’ refers to –
  • Consumer participation in production
  • Consumer is the Ruler of the state
  • Producers produce any type of goods and dump them in the market.
  • Producers produce only those goods which consumers prefer to buy.
  1. A Capitalist Economy uses …… as the principal means of allocating resources –
  • Demand
  • Supply
  • Efficiency
  • Prices
  1. The concept of “Competition” in a capitalist Economy refers to –
  • Competition among Seller to sell their goods
  • Competition among to obtain goods to satisfy their wants.
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Advertisement, Price-Cutting, Discounts, etc. in a Capitalist Economy are-
  • Attributed to Government Regulations
  • Methods of handling competition
  • Effects of producer Sovereignty
  • All of the above
  1. “Inequalities of Income” refers to –
  • Gap between rich and poor
  • All workers do not equal wages.
  • All companies do not earn same profit.
  • All of the above
  1. Which of the following applies to a socialist economy?
  • Socio-Economic Objectives
  • Market Mechanism
  • Wide Inequalities of Incomes
  • Wide Inequalities of Incomes
  • Competition among producing firms
  1. Which of the following applies to a socialist Economy?
  • Private ownership of all resources and factors of production
  • Total absence of government regulation
  • Balancing between social objectives and economic objectives of the society
  • Market mechanism to solve all central problems of the economy
  1. In a socialist economy, the concept of consumer sovereignty is –
  • Restricted
  • Unrestricted
  • Recognized
  • None of the above
  1. Socialist Economy is also called-
  • Command Economy
  • Centrally Planned Economy
  • Controlled Economy
  • All of the above
  1. Identify the correct statement:
  • In capitalist Economy, people are not free to spend their income as they like
  • In socialist Economy, the right to work is guaranteed but the choice of occupation gets restricted
  • In socialist economy, a relative inequality in income is an important feature.
  • In today’s world, USA is a purely Socialist Country.
  1. In which type of economic system is cost-benefit analysis used to answer the fundamental questions-

What, how, and for whom to produce?

  • Market Economy
  • Command economy
  • Mixed economy
  • Regulated economy
  1. In mixed economies, the answer the fundamental questions – what, how, and for whom to produce, are obtained by-
  • Market forces of demand and supply
  • Government regulations
  • Cost benefit analysis
  • All of the above
  1. In a mixed economy, industries are found in-
  • Private sector
  • Private sector
  • Joint sector
  • All of the above
  1. Prices of essential goods are decided by the Government, and prices of normal goods are decided by the market forces of demand and supply. This concept is called-
  • Pricing Mechanism
  • Market Mechanism
  • Dual System of pricing
  • Unregulated Pricing
  1. In a Mixed Economy, the Government may provide subsidies and other incentives, to make the Private sector establish and develop industries in backward regions. This is primarily done to ensure-
  • Productive Efficiency
  • Balanced Regional Development
  • Profit Motive
  • All the above
  1. In India, the Central Planning Authority is called-
  • State Government
  • President of India
  • Ministry of Economy
  • Planning Commission
  1. ___ helps us to understand the problem of scarcity better, by showing what can be produced with given resources and technology.
  • Isoquant curve
  • Production possibility curve
  • Giffen’s paradox
  • Isocost curve
  1. Which of the following constitute an assumption in construction a PPC?
  • Only two types of goods
  • Fixed quantity of productive resources
  • No change in technology
  • All of the above
  1. Opportunity Costs arise-
  • When there is only course of action
  • When there two or more alternative courses of action
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Suppose you find Rs. 500. If you choose to use Rs. 500 to go to a Cricket match, your Opportunity Cost of going to the game is-
  • Nothing, because you found the money
  • 500 (because you could have used Rs. 500 to buy other things) plus the value of your time spent at the game.
  • 500 (since you could have used the Rs. 500 to buy other things) plus the value of your time spent at the game, plus the cost of the dinner you purchased at the game
  • 25,000
  1. If resources are abundant, then opportunity costs will be-
  • Infinity
  • Increasing trend
  • Decreasing trend
  • zero
  1. If the marginal (Additional) Opportunity cost were to show a decreasing trend, then the PPC would be-
  • Convex to the origin
  • Straight line
  • Backward bending
  • Concave to the origin
  1. If the PPF is linear, i.e. a Straight line, which of the following is true?
  • As the production of a product increases, the opportunity cost of that product rises.
  • As the production of a product increases, the opportunity cost of that product falls.
  • Opportunity costs are constant.
  • The economy is not at full employment when operating on the PPF
  1. What does an outward shift in the Production possibility curve indicate?
  • Economic Stagnation
  • Economic growth / growth of resources
  • Economic recession
  • Hyperinflation in the economy
  1. Which of the following would not cause an economy’s PPC to shift to the right?
  • Discovery of new and advanced materials which makes manufacturing more efficient.
  • Decrease in unemployment
  • Improvements in technology.
  • Widespread application of irrigation to agricultural land.
  1. Which of the following is likely to cause an inward shift in a country’s PPC?
  • Earthquake destroying resources of the country
  • Scientists discovering new machines
  • Workers getting jobs in the new metro – project
  • The country finds new reserves of crude oil
  1. An inward shift in a country’s PPC reflects-
  • Increase in quantity of resources
  • Discovery of new resources
  • Identification of new means of production
  • Reduction in quantity of resources
  1. Use the following data and answer the next 8 questions.

In an economy, the following combinations of two goods can be produced with the available resources, and the given state of technology-

Situation Cellphones (Units) Rice (Quintals)
A 0 60,000
B 1000 55,000
C 2000 48,000
D 3000 38,000
E 4000 23,000
F 5000 0

 

  1. All situations A to F deal with –
  • Full use of available resources
  • Under – utilization of available resources
  • No use of available resources
  • Demand for more resources
  1. In Situation B, the Opportunity cost of Producing 1,000 cellphones is-
  • 60,000 quintals of rice
  • 55,000 quintals of rice
  • 5,000 quintals of rice
  • Nil
  1. The opportunity cost of increasing production of cellphones from nil to 2,000 units is –
  • 12,000 quintals of rice
  • 5,000 quintals of rice
  • 7,000 quintals of rice
  • Nil
  1. The opportunity cost of increasing production of cellphones from nil to 5,000 units is –
  • 23,000 quintals of rice
  • 60,000 quintals of rice
  • 1,000 quintals of rice
  • nil
  1. If Opportunity cost are analysed from point A to Point F, they will be showing an-
  • Increasing trend
  • Decreasing trend
  • Constant change
  • No change at all
  1. If the above points A to F were depicted on a graph, such PPC would be-
  • Convex to the origin
  • Concave to the origin
  • Straight line
  • Rectangular hyperbola
  1. Each of the above points A to F represents –
  • Productively efficient situation
  • Production at least possible cost
  • Full use of resources
  • All of the above
  1. If at some other point say K, the economy produces 3,000 cellphones and 32,000 Quintals of Rice, it would –
  • Represent under – utilization of resources
  • Would lie below the PPC
  • Both (a) and (b)
  • Neither (a) nor (b)
  1. Read table and answer next 5 Questions
Table
Production Possibilities

(alternatives)

A B C D E F
Hot Pockets 15 12 9 6 3 0
Eggos 0 6 11 15 18 20

 

  1. Referring to Table, in moving from point D to point C, the opportunity cost of 1 more hot pocket is:
  • 4 eggos.
  • ¾ eggos.
  • 1 eggo
  • 4/3 eggos.
  1. Given the data in Table above, as one moves successively from point A to points B, C, D, E, and F the opportunity cost of egos:
  • Increases as more eggos are produced
  • Decreases as more eggos are produced
  • Remains constant as more Eggos are produced.
  • Cannot be measured.
  1. Given the data in Table above , as one moves successively from point F to points E, D, C, B, and A, the opportunity cost of Hot Pockets:
  • Increases as more hot potatoes are produced
  • Decreases as more hot potatoes are produced.
  • Remains constant as more hot potatoes are produced.
  • Cannot be measured.

With the help of this table answer the next 5 Questions:-

Point Eggs Bacons
A

B

C

D

E

0

30

50

60

30

40

35

20

0

20

 

  1. If the economy is operating at point C, the opportunity cost of production of an additional 15 units of bacon is
  • 40 units of eggs.
  • 10 units of eggs.
  • 30 units of eggs.
  • 20 units of eggs.
  1. If the economy the economy was operating at E:
  • The opportunity cost of 20 additional units of eggs is 10 units of bacon.
  • The opportunity cost of 20 additional units of eggs is 20 units of bacon.
  • The opportunity cost of 20 additional units of eggs is 30 units of bacon.
  • 20 additional units of eggs can be produced with no impact on bacon production.
  1. Which of the following represents a movement towards better utilization of existing resources?
  • A movement from point A to point B
  • A movement from point E to point B
  • A movement from point C to point B
  • A movement from point F to point B.
  1. Which of the following is correct?
  • Normative economics is not concerned with value judgment.
  • A market is a process that reconciles consumer decision, production decisions and labour decisions.
  • A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy.
  • Both (b) and (c).
  1. Which of the following statements is correct?
  • In a two-good economy, the PPC reflects the maximum amount of one good that can be produced when a given amount of the other good is produced.
  • Microeconomics is the study of the behavior of the economy as a whole.
  • Positive economics focuses on welfare of the people of a society.
  • None of the above.
  1. Which of the following statements is incorrect?
  • Unlike normative economics, positive economics is based on objective analysis of economic issues.
  • The opportunity cost of a good is the quantity of other goods sacrificed to get another unit of that good
  • Microeconomics emphasizes interactions in the economy as a whole.
  • None of the above.
  1. Which of the following is incorrect?
  • The PPC shows the maximum combination of outputs that the economy can produce using all the recourse available.
  • Increasing opportunity costs implies a PPC concave to the origin.
  • Free markets are the markets in which the governments do not intervene.
  • All of the above are correct.
  1. Which of the following statements is correct?
  • Robbins has made Economics as a form of welfare economics
  • The law of demand is always true
  • All capital is wealth but all wealth is not capital
  • None of the above
  1. Identify the correct statement-
  • In deductive method of economics, the conclusion moves towards general starting from particular.
  • Micro-economics and macro-economics are inter-dependent.
  • In a capitalist economy, the economic problems are solved only by the planning commission.
  • Higher the prices, lower is the quantity demanded of a product, is a Normative statements.
  1. Identify the incorrect statement-
  • In inductive method of economics, the conclusion moves towards particular starting from general.
  • Micro-economics and macro-economics are inter-dependent
  • In a mixed economy, there are three sectors viz private, public and joint.
  • PPC is the basis for studying demand and supply relationships in an economy.
  1. Which of the following statements is correct?
  • Only marshall’s definition of economics is the true definition of economics.
  • The PPC does not study growth prospects in an economy.
  • Central problems of an Economy are attributed to scarcity of resources and unlimited human wants.
  • None of the above.
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