Multiple Choice Questions on Economics

Multiple Choice Questions on Economics

1-Investment Multiplier is a 

(a) ratio between income and investment. 

(b) ratio between investment and savings 

(c) ratio between consumption and investment  

(d) None of the above

2-If other things remaining the same, the quantity of money in Fisher’s approach has 

(a) direct proportional relationship with price level. 

(b) direct proportional relationship with value of money. 

(c) inverse proportional relationship with price level.  

(d) no relation with the value of money.

3-Who propounded the theory of unlimited supply of labour ? 

(a) Schumpeter  

(b) Rosestien Rodan 

(c) Mill   

(d) Lewis

4-The theory of stages of growth is associated with 

(a) Simon Kuznets

(b) W.W. Rostow

(c) Paul Samuelson 

(d) Colin Clark

5-A monopolist is able to maximise his profit when 

(a) his output is maximum 

(b) he charges higher prices 

(c) his average cost is minimum  

(d) his marginal cost is equal to marginal revenue

6-Price discrimination will be profitable only if the elasticity of demand in different markets will be 

(a) uniform

(b) less

(c) zero 

(d) different

7-Wagner’s hypothesis is associated with 

(a) Public receipts 

(b) Public expenditure 

(c) Supply of money  

(d) Public debt

8-Marginal cost of allowing another person to benefit from a pure public goods is 

(a) Zero

(b) one 

(c) both (a) and (b)  

(d) more than one

9-If elasticity of demand is perfectly inelastic, then burden of tax will be on 

(a) Buyer  

(b) Seller 

(c) on both (a) and (b)  

(d) More on seller

10-Given competitive conditions, a firm in the long run earn 

(a) Quasi-rent

(b) Pure-rent

(c) Normal profit 

(d) Economic profit

11-According to Engel’s Law of consumption, the following commodities are likely to have income elasticity of less than one 

(a) Garments

(b) Motor car

(c) Cosmetics

(d) Wheat and Rice

12-In Cobb-Douglas production function Q = ALα Kβ there will be increasing returns to scale, if 

(a) α + β = 1

(b) α + β > 0

(c) α + β > 1 

(d) α + β < 1

13-Find out the price elasticity in the following example : Price Demand 5(P1) 10(Q1) 4(P2) 15(Q2) 

(a) – 2.5

(b) + 3.5

(c) + 4.0 

(d) + 2.5

14-Which one of the following is NOT an assumption of classical theory of employment ? 

(a) Full employment 

(b) Laissez-faire policy 

(c) State intervention.  

(d) Perfect competition

15-Under the liquidity trap conditions, an increase in money supply will  

(a) increase investment 

(b) increase level of employment 

(c) reduce the rate of interest  

(d) have no effect on interest rate, investment and employment

16-The final resting place of a tax is called 

(a) impact of taxation 

(b) incidence of taxation 

(c) effect of taxation  

(d) shifting of taxation

17-The most important source of Public Revenue is 

(a) Taxation  

(b) Fees 

(c) Fines and Penalties  

(d) Subsidies

18-“Any asset capable of serving as a temporary abode of purchasing power is money.” This definition of money is given by

(a) Milton Friedman 

(b) Gurley and Shaw 

(c) Francis Walker  

(d) Crowther

19-Which indivisibilities have been described in Rodan’s development model ? 

(a) Indivisibilities in the production function only. 

(b) Indivisibilities of the Demand only. 

(c) Indivisibilities in the supply of savings only.  

(d) All the above indivisibilities.

20-The Exponent of Critical Minimum Effort thesis was 

(a) Liebenstein

(b) Schumpeter

(c) Domar 

(d) Meade

21-Economic growth is measured by 

(a) Increase in national income

(b) increase in infrastructure 

(c) increase in economic welfare 

(d) urbanisation

22-Under progressive taxation, the real value of tax on a given level of real income : 

(a) decreases under inflation

(b) rises under depression 

(c) rises under inflation  

(d) remains unchanged under inflation

23-The relationship between elasticity of demand (e), Average Revenue (AR) and Marginal Revenue (MR) is shown by which of the following formula ?

(a) e = MR / (AR – MR)

(b) e =  AR/MR

(c) e = MR/AR 

(d) e = AR / (AR – MR)

24-In case of Complementary goods cross elasticity of demand will be 

(a) Negative

(b) Zero

(c) Unitary 

(d) Infinite

25-Implicit costs are 

(a) equal to total fixed costs 

(b) comprised entirely of variable costs 

(c) payments for self-employed resources  

(d) always greater in the short run than in the long run


1-(A), 2-(A), 3-(D), 4-(B), 5-(D), 6-(D), 7-(B), 8-(A), 9-(A), 10-(C), 11-(D), 12-(C), 13-(A), 14-(C), 15-(C), 16-(B), 17-(A), 18-(A), 19-(D), 20-(A), 21-(A), 22-(C), 23-(D), 24-(A), 25-(C)