Economics MCQ Questions and Solutions with Explanations

91

Consider the following combinations of inputs and outputs-

Labour	Capital	Output
5	10	1
6	12	2
7	14	3
8	16	4
9	18	5
10	20	6

This production technology satisfies

A) increasing returns to scale B) diminishing returns to scale C) constant returns to scale D) increasing returns initially, followed by decreasing returns to scale

Discuss

Answer & Solution

Answer: Option C

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92

The slope of an isoquant tells

A) The decrease in capital necessary to keep output constant when labour increases by one unit B) The increase in mpL when capital increases C) The decrease in capital necessary to keep MPL constant when labour increases by one unit D) The increase in output when both inputs are increased

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Answer & Solution

Answer: Option A

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93

The market equilibrium for a commodity is determined by

A) the market demand for the commodity B) the market supply of the commodity C) the balancing of the forces of demand and supply for the commodity D) any of the above

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Answer & Solution

Answer: Option C

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94

The economies and diseconomies of scale explain why the

A) Short-run average fixed cost curve declines so long as output increases B) Marginal cost curve must intersect the minimum point of the firm's average total cost curve C) Long-run average total cost curve is typically U-shaped D) Short-run average variable cost curve is U-shaped

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Answer & Solution

Answer: Option C

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95

If a change in the price of one of good causes a change in quantity demand, then the cross elasticity of demand between them is

A) Negative B) Positive C) Zero D) One

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Answer & Solution

Answer: Option A

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96

Due to which of the following reason/s monopolistic firms incur advertisement cost.
1. Differentiate goods
2. Large number of sellers
3. Avoid price war
Select the correct answer

A) 1 and 2 B) Both 1 and 3 C) Both 2 and 3 D) All of the above

Discuss

Answer & Solution

Answer: Option B

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97

Match the following.

List-I	List-II
a. Fixed costs	1. Fall at first and then rise as the firm approaches full capacity
b. Variable costs	2. Continue to fall at rate proportionate with the increase in output
c. Total costs	3. Are those costs which do not increase as output increases
d. Average total costs	4. Are the amount paid to all the factors employed in producing the output
e. Average fixed costs	5. Are those costs which increase as output increase

A) a-3, b-5, c-4, d-1, e-2 B) a-4, b-5, c-1, d-2, e-3 C) a-5, b-4, c-3, d-1, e-2 D) a-1, b-2, c-3, d-4, e-5

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Answer & Solution

Answer: Option A

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98

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

A) For monopoly B) For oligopoly C) For perfect competition D) For monopolistic competition

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Answer & Solution

Answer: Option C

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99

Assuming a downward-sloping demand curve and upward sloping supply curve, a higher equilibrium price may be caused by

A) A fall in demand B) An increase in supply C) Improvement in production technology D) An increase in demand

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Answer & Solution

Answer: Option A

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100

Which one of the following is not helpful in increasing productivity?

A) Increase in capital product ratio B) Replacement of labour with capital according to the change in price ratios C) Learning from action D) None of the above

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Answer & Solution

Answer: Option A

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Economics MCQ Questions and Solutions with Explanations | Commerce