Economics Fundamentals MCQs

Economics Fundamentals MCQs

Try to answer these 30 Economics Fundamentals MCQs and check your understanding of the Economics Fundamentals subject.
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1: At a given price, the demand for a certain commodity is 1000 units, whereas the quantity supplied is 2000 units. What happens to the price?

A.   It increases.

B.   It decreases.

C.   It remains unchanged.

D.   None of the above.

2: _____________ is a situation in which different sectors of an economy experience simultaneous and coordinated expansion.

A.   Deflation

B.   Economic efficiency

C.   Opportunity cost

D.   Balanced Growth

3: The optimum tariff of a country is the highest when the elasticity of the offer curve of the opposite country is:

A.   More than one

B.   One

C.   Less than one

D.   Infinite

4: The supply of the capital goods in the economy:

A.   Is fixed except if there is a change in the government's tax policies.

B.   Is fixed once and for all because capital goods are irreproducible economic goods.

C.   Is fixed in the very short run only. The reason being if the capital is allowed to wear out, its supply decreases, while whenever there is a new investment, its supply increases.

D.   Can vary in the short run depending on factors like their frequency of use in a week, the intensity with they are used, etc.

5: An economy in which two distinct economic systems marked by varying levels of technological advancement and development co-exist is known as a:

A.   Sectoral economy

B.   Dual economy

C.   Pluralistic economy

D.   Regional economy

6: _____________ is a deliberate downward adjustment in the official exchange rates of a country relative to a foreign reference currency.

A.   Devaluation

B.   Depreciation

C.   Revaluation

D.   Redenomination

7: When in an economy, all decisions relating to what goods and services to produce, how to produce, and what quantities to produce are made by a central authority, it is known as:

A.   Centralized planning

B.   Decentralized planning

C.   Fiscal planning

D.   Financial planning

8: There are _____________ approaches to analyze devaluation.

A.   Four

B.   Six

C.   Two

D.   Three

9: What would be the National Product at market prices for a certain year, if the National Product at factor cost is 4 billion USD, Indirect taxes are $1 billion USD and subsidies are $0.25 billion USD?

A.   $5.50 billion USD

B.   $5.25 billion USD

C.   $4.75 billion USD

D.   $2.50 billion USD

10: Fixed and variable costs are distinguished from each other in terms of:

A.   Whether it is possible to change the costs during the life of the plant.

B.   Whether the costs are contracted legally or not.

C.   Whether the costs are taken into account or not when calculating the total costs.

D.   Whether the costs vary or remain unchanged with the quantity or output produced in the short run.

11: If the supply of labour and capital of a country grow in the same proportion as before but the technology remains the same, the production possibility curve of the country would shift outwards:

A.   Evenly along its entire length.

B.   More along the axis measuring the Labour-intensive commodity.

C.   More along the axis measuring the Capital-intensive commodity.

D.   Any of the above.

12: From where does the demand for funds arise according to the loanable fund theory?

A.   Business

B.   Consumer

C.   Government

D.   All of the above

13: Indices of the physical volume of production are NOT widely used to measure development because:

A.   It is not possible to measure physical volumes.

B.   They do not allow for quality improvements.

C.   It is not possible to compare physical volumes.

D.   None of the above.

14: Isoquant maps _____________:

A.   Do not depend on input prices.

B.   Depend on the inputs prices.

C.   Do not depend on the quantity of the inputs.

D.   None of the above.

15: Which of the four equations given below is INCORRECT?

A.   National income = Consumption + Investment

B.   National income = Effective demand consumption + Savings

C.   National income = Consumption + Savings

D.   National income = Gross National Product

16: Economics can be defined as:

A.   A branch of knowledge concerned with the production, distribution, and consumption of goods and services.

B.   The study of the processes, principles, and structure of government, and of political institutions.

C.   The study of the mind and behavior.

D.   The analysis and interpretation of the past that enables us to study continuity and change over time.

17: _____________ refers to the change in the output of a firm or industry in the long run, when all inputs are increased or decreased simultaneously in the same ratio.

A.   Returns to scale

B.   Constant returns to scale

C.   Decreasing returns to scale

D.   None of the above

18: Which of the following represents the marginal propensity to import?

A.   ΔM / ΔX

B.   ΔX / ΔY

C.   ΔM/ ΔY

D.   ΔM /Y

19: Why are intermediate goods used to make final goods NOT included in the Net National Product?

A.   To avoid double counting.

B.   To avoid the inclusion of inferior goods.

C.   To avoid cheating of the consumer.

D.   None of the above.

20: Per Capita Real Income is calculated by dividing:

A.   Real National Income by the Working Population

B.   Real National Income by the Total Population

C.   Real National Income by the Number of Workers

D.   None of these.

21: The main area of application implementation of the Cobb-Douglas production function is:

A.   Agriculture

B.   Industries

C.   Experiments in agricultural institutions

D.   None of the above

22: In response to an increase in the demand for its goods, a firm takes a bank overdraft, buys raw materials with the money so raised, and increases production. The firm can be said to have resorted to:

A.   A financial adjustment.

B.   A long-term adjustment.

C.   A short-term adjustment.

D.   None of the above.

23: Which of the following would you include when calculating the GNP?

A.   Roof repair work done by the owner of a house himself.

B.   Household work done by a housewife.

C.   Vegetables grown by a farmer for his personal consumption.

D.   A surgery carried out at a hospital.

24: _______________ is a tariff that maximizes a country

A.   Prohibitive tariff

B.   Optimum tariff

C.   Effective tariff

D.   Protective tariff


The breakdown of the gold standards was the result of which of the following factors?

1. Deflation policies caused considerable difficulties.

2. Some gold standard countries did not obey the gold standard rules.

3. Sterling was over valued.

4. The export of gold became impossible.


1 and 2 


1, 2 and 3 only


2, 3 and 4 only


1, 2, 3 and 4

26: Which among the following hinders economic development?

A.   Industrial growth

B.   Internal savings

C.   Agricultural growth

D.   Low rate of capital formation

27: When the production process is subject to increasing returns to scale, the returns to a variable factor of production:

A.   Increase

B.   Decrease.

C.   Are impossible to determine without knowing the strength of the increasing returns to scale.

D.   Are constant.


Consider the following information:

National Income at current prices for the year Y1 = $30 billion USD

National Income at current prices for the year Y2 = $80 billion USD

Price Index for Y1 = 150

Price Index for Y2 = 200

What should be the National Income at constant prices for the year Y2?


$40 billion USD


$60 billion USD


$53 billion USD


None of the above


________________ is a market structure in which many sellers sell differentiated products.


Monopolistic competition 


Pure competition




All of the above

30: The vertical distance between the average total cost curve and the average variable cost curves tends to __________ as the production increases beyond a point.

A.   Diminish

B.   Increase

C.   Remain constant

31: In most developing countries, ________.

A.   Birth rates are much higher than death rates, so the population is growing rapidly

B.   Population size grows faster and faster as the population gets bigger.

C.   The population stops increasing in size.

D.   Advocates mixed-species plantings and rotating crops

32: In many large u.s. cities, taxicab companies operate as near monopolies because of_____.

A.   Single seller

B.   Licenses

C.   Price is greater than marginal cost

D.   Differences among buyers' elasticities of demand

33: In the _________, the perfectly competitive firm will seek out ________________________ .

A.   Long run; reducing production or shutting down

B.   Accounting profit; excluding opportunity cost

C.   Short run; the quantity of output where profits are highest

D.   Long run; increasing its production

34: In the factor market, firms ________ and households ________.

A.   The tools and instruments used to produce other goods and services

B.   The goods market and the factor market

C.   Pay rent, wages, interest, and profit; earn rent, wages, interest, and profit

D.   Antonio, the manager of the local Taco Hut, purchases a new deep fryer

35: Marginal cost is ________ average variable cost when ________.

A.   Marginal costs must be increasing; average total

B.   Equal to; average variable cost is minimized.

C.   Both

D.   None of these

A.   Temporal

B.   Sequential

C.   Atmospheric

D.   Spatial

E.   Epistemic

37: A flexible exchange rate is one that _______

A.   Is determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market to block the unregulated forces of demand and supply

B.   Is determined by demand and supply in the foreign exchange market with no direct intervention by the central bank

C.   Follows a path determined by a decision of the government or the central bank and is achieved by central bank intervention in the foreign exchange market

D.   Operated in the world economy from the end of World War II to the early 1970s

38: Among the costs of integration for states is __________.

A.   A potential cultural backlash against homogenizing effects

B.   The declined ability to take advantage of foreign trade

C.   A declining sense of community as integration proceeds

D.   A greater diversity of cultures