107

Introduction

Question Bank1. “Science of wealth” is the definition

given by2. “Economics is the study of

mankind of the ordinary businessof life” given by

3. Science which tells about “what itis & what ought to be” is

4. Positive economics does not givevalue judgments (True / False)

5. Positive economics says only aboutthe ends. (True / False)

6. Normative economics is concernedwith welfare judgments (True /False)

7. Microeconomics is also known as8. In which type of economic system

has government no control overprice fluctuation.

108

Answer Sheet1. Adam Smith2. Alfred Marshall3. Normative Science4. False5. True6. True7. Price Theory8. Market Economy

109

9. In which economic system is costbenefit analysis used to answer thefundamental question – what, how& for whom to produce?

10. In Static economic models ,variablesdo not have a time dimensions. (True/ False)

11. “Economics is what economists do”was stated by

12. Micro economic theory deals with13. What is the main problem of every

economy?14. In economic theory the term “

means” refers to15. Who described economics in terms

of material welfare?16. Cetris paribus means17. The term “ends” refer to18. Who alleged that economic should

not be normative in character.

110

Answer Sheet9. Mixed Economy10. True11. Jacob Viner12. Economic behaviors of individual

economic decision making units.13. Scarcity of economic resources14. Resources15. Cannon16. Other things being constant17. Wants18. Robbins

111

19- Wealth is a ______ concept ineconomic.

20- In economics Income is a _____concept.

21- The basic assumption of aneconomic analysis are

22- Who one is known as father ofeconomics?

23- Who said, when six economistgathers there are seven opinions.

24- The concept of consumer surpluswas coined by

25- The term “Micro” is derived fromthe Greek word which means.

26- Deductive method goes fromgeneral to particular. (True / False)

27- Inductive method is also known as

112

Answer Sheet19. Stock20. Flow21. Cetris Paribus & Rational Behavior22. Adam Smith23. Barbara Wotten24. Alfred Marshall25. Small26. True27. Historical, Realistic & Analytical

113

DemandQuestion Bank1. A desire culminates into demand

when it is backed by2. The _______ price that a customer

is willing to pay for a given quantityis called demand price.

3. Goods or services that are notnecessary for living are

4. Complementary goods are thosewhich are consumed

5. If price of sugar will increase thedemand for coffee will

6. Increase in price of a product resultsin increased consumption of theproduct as the product becomecheaper compared to otherproducts. This effect is known as

7. Traditional approach to law ofdemand was propounded by

8. According to modern approach ,law of demand is caused by

114

Answer Sheet1. Purchasing power & willingness to

spend money2. Maximum Price3. Wants4. Simultaneously5. Fall6. Income effect7. Alfred Marshal8. Income & Substitution effect

115

9. Increase in Demand is also knownas

10. Decrease in Demand is also knownas

11. Tea & Coffee are12. Which type of relationship exists

between the price & quantitydemanded?

13. Demand curve slopes14. Shift in demand not take place

because of15. For what type of goods does

demand fall with a is decrease inincome level of household?

16. ________ demand explains thecollective behavior of all the buyersin a market price?

17. The goods that can be substitutedfor each other is called

18. The Law of demand is19. The law of demand is quantitative

statements. (True / False)

116

Answer Sheet9. Expansion in demand10. Constraction in Demand11. Alternative goods12. Inverse13. Downward from left to right14. Change in price of the product15. Inferior Goods16. Aggregate Demand17. Substitute Goods18. Price falls, demand rises19. True

117

20. In case of normal goods the theincome effect is

21. The price elasticity of demandwould be higher for those productwhich have

22. The Price elasticity of demand foraddictive products would be

23. Inferior goods have a negativeincome elasticity of demand.(True/ False)

24. IF two products are good substitute, the value of cross elasticity willbe

25. Usually the demand for necessitiesis highly inelastic. (True / False)

118

Answer Sheet20. Positive21. Large number of substitutes22. Less than 123. True24. Positive25. True

119

Cost & Law of SupplyQuestion Bank1. Benefit foregone in favor of

alternative course of action iscalled,

2. If there is no production in shortrun , TC will be

3. In the short run, TC start from4. Economics cost means5. Accounting Cost means6. Outlay cost means the cost incurred

actually. (true / False)7. The minimum price that a supplier

expects to make available a specificquantity for sale is called

8. The maximum quantity that asupplier is prepared to supply inmarket at a given price is called

9. Under law of supply , ceteris paribusis

120

Answer Sheet1. Opportunity cost2. Positive3. Positive vertical intercept4. Explicit cost + Implicit cost5. Explicit cost or money cost6. True7. Supply Price8. Supply Quantity9. Cost of production & Production

technology

121

10. According to Law of supply higherthe price higher the quantity theseller is prepared to supply inmarket. (True / False)

11. The measurement of sensitivity ofquantity demand to change in priceis called,

12. Utility elasticity is a type ofelasticity in economics. (True /False)

13. Point elasticity concept waspropounded by

14. Demand of Salt is inelastic becauseof

15. Price elasticity of demand is notaffected by cost of production.(True / False)

16. Luxury goods have ____ degree ofelasticity.

17. Number of buyers is a factor inmarket supply of product. (True /False)

122

Answer Sheet10. True11. Price elasticity12. False13. Marshal14. No substitute15. True16. High17. False

123

18. When the price of complementaryproducts falls , the demand of theother product will_____.

19. The _____ elasticity of demand ofnormal goods is generally > 0.

20. The _____ elasticity ofcomplementary goods is generally< 0.

21. The _____ elasticity of substitutegoods is generally > 0.

22. The supply curve is normallydownward.

23. If supply curve is relatively elasticit means that elasticity value is ___than one.

124

Answer Sheet18. Increases19. Income elasticity20. Cross elasticity21. Cross elasticity22. Upward rising23. Less

125

ProductionQuestion Bank1. Production includes mining,

manufacturing & serviceproviding. (True / False)

2. Production can be defined as3. Production just shows the

relationship between input &output.(True / False)

4. Production reveals the output thatyields the maximum profit. (True/ False)

5. Production function shows theoutput produced with a givenamount of input.(True / False)

6. Variable factors means those factorof production which can bechanged in

7. Change in total revenue due toincremental change in quantitysupplied.

126

Answer Sheet1. True2. Creation or addition of utility.3. False4. False5. True6. Short run7. Marginal Revenue

127

8. Which law examines theproduction function keeping onefactor variable?

9. During the stage of decreasingreturns

10. The introduction of new productwith added features in the marketis known as

11. At what point is the marginalproduct maximum?

12. Isoquant is also known as13. Isocost is also known as14. Usually isoquants are Convex to the

origin. (True / False)15. If there is fixed factor & variable

factor the law should be Law of16. Cost function is related to

production function. (True /False)17. Who regards fixed costs as

supplementary cost?

128

Answer Sheet8. Law of variable proportion.9. MP is decreasing10. Product innovation11. Inflection point12. Production indifference curve13. Price line14. True15. Variable proportion16. True17. Marshal

129

18. Term private & social cost werefirst used by

19. The law of diminishing returnsapplies in

20. Social cost is the cost which isincurred by

21. Private cost is the cost which isincurred by

22. Positive externality arises when23. Labour supply curve is24. In economic theory, in short run

all the cost are25. Discrepancies between private cost

& social cost give rise to

130

Answer Sheet18. Pigou19. Short run20. Society21. Industry / Firm22. Social cost is less than the private

cost23. Backward sloping24. Fixed25. Externalities

131

Consumer BehaviorQuestion Bank1. Law of diminishing Marginal utility

states that with successive increasein consumption of additional unitmarginal utility also decreases.(True / False)

2. Supply refers to the quantity whicha firm is

3. Benefit foregone by not puttingthe resources to their nextalternative use is called

4. Various combinations of twocommodities that give same levelof consumer satisfaction, is called

5. A line which shows combination oftwo commodities that a consumercan buy within same budget, is called

6. Difference between what acustomer is willing to spend for aproduct & what he actually paysfor it , is called

132

Answer Sheet1. True2. Willing to supply at a given price.3. Opportunity Cost4. Indifference Curve5. Budget Line6. Consumer Surplus

133

7. Indifference curve are convex tothe origin due to

8. If indifference curve is concave tothe origin it would implies

9. Higher indifference curve indicates10. In short run producer surplus is11. In long run producer surplus is12. Who propounded Kinked demand

curve hypotheses13. Total utility is maximum when14. MU curves will be below X-axis

when15. When the total utility is increasing

at an increasing rate marginalutility is

16. “Utility or satisfaction is subjectiveconcept therefore it could only beranked” defines the position of

17. A=B=5, this statement is a18. The want satisfying the power of a

commodity is known as

134

Answer Sheet7. Diminishing marginal rate of

substitution8. Increasing marginal rate of

substitution9. Higher level of satisfaction

combination10. Greater than economic profit11. Equal to economic profit12. Sweezy13. Marginal utility is zero14. MU is negative15. Increasing16. Ordinal utility theorist17. Cardinal measure of utility18. Utility

135

19. Utility measured in terms of20. The total utility divided by the

number of units consumed is knownas

21. The point where marginal utilitybecome zero, is called

22. The book “Value & Capital” iswritten by

23. Diminishing return occurs when afirm uses more & more on sameinputs while holding all other inputsconstant. (True /False)

24. Consumer’s surplus is highest in thecase of

25. Which one theory can be used toargue in favor of direct taxes?

136

Answer Sheet19. Utils20. Average utility21. Point of safety22. J R Hicks23. True24. Necessities25. Equi marginal utility

137

Price & Output DeterminationQuestion Bank1. ____ rent is equal to firm’s total

profits.2. A _______ monopoly is one in

which a monopolist is facing amonopsonist.

3. The theory of monopolisticcompetition is developed by,

4. Under perfect competition thenumber of firms are large. (True /False)

5. Under ________ competition theprice of product can not becontrolled.

6. Which price refers to the price atwhich seller refuse to supply thegoods.

7. In the very _____ run demand onlycan change.

8. In the _____ run both demand &supply can change.

138

Answer Sheet1. Quasi2. Bilateral3. H E Chamberlin4. True5. Perfect6. Reserve Price7. Short run8. Long run

139

9. Equilibrium price may bedetermined through,

10. What is the shape of the demandcurve faced by a firm under perfectcompetition?

11. Under ______ market condition,firms make normal profit in thelong run,

12. The no. of sellers under Perfectcompetition is ,

13. The no. of sellers underMonopolistic competition is ,

14. The no. of sellers under oligopolyis ,

15. The no. of sellers under monopolyis ,

16. Product differentiation underPerfect competition is ,

17. Product differentiation underMonopolistic competition is ,

18. Product differentiation underOligopoly is ,

140

Answer Sheet9. Demand & Supply10. Horizontal11. Perfect competition.12. Many13. Many14. Few15. One16. None17. Extreme18. Not substantial

141

19. Product differentiation underMonopoly is ,

20. Price elasticity of demand for a firmunder Perfect competition is ,

21. Price elasticity of demand for a firmunder Monopolistic competition is,

22. Price elasticity of demand for a firmunder Oligopoly is ,

23. The degree of control over priceunder Perfect competition is ,

24. The degree of control over priceunder Monopolistic competition is

25. The degree of control over priceunder Oligopoly is ,

26. The degree of control over priceunder Monopoly is ,

142

Answer Sheet19. None20. Infinite21. Large22. Small23. None24. Some25. Some26. Considerable

143

Price & Output Determination IIQuestion Bank1. What should firm do if total

revenue from its product does notequal or exceeds its variable cost?

2. What should firm do when marginalrevenue is greater than marginalcost?

3. If any unit of production adds moreto revenue than to cost it will result,

4. If any unit of production adds moreto cost than to revenue it willresult,

5. Which one market never sufferslosses in long run?

6. How prices are determined underPerfect competition?

7. What does the Kink demand curveexplains?

8. The price is determined accordingto Australian approach by,

144

Answer Sheet1. Stop production2. Expand output3. Increase in profits4. Decrease in profits5. Monopoly6. Equilibrium prices of industry7. Rivalry reactions in an oligopoly.8. Utility

145

9. In the long run, prices are governedby,

10. Who called price mechanism asinvisible hands?

11. Bilateral monopoly is where,12. BEP means13. Super normal profit occurs when14. What is the other name given to

average revenue curve?15. Average profit is the difference

between,16. _____ refers to increase in welfare

of one individual without decreasingthe welfare of another individual.

17. _____ is a situation in which it isnot possible to make someonebetter off without making someoneworse off.

18. _____ is the price at whichdemand for a commodity is equalto its supply.

146

Answer Sheet9. Cost of production10. Adam Smith11. One buyer & one seller12. TR = TC13. AR is more than AC14. Demand Curve15. AC & AR16. Distribution efficiency17. Pareto efficiency18. Equilibrium price

147

19. _____ refers to a market wheregoods & services are bought & sold.

20. _____ refers to a market whereservices of factors of productionare bought & sold.

21. Externalities are also called,22. When price discrimination extends

two or more countries, it is called,23. Adam Smith called price mechanism

as24. Australian approach is also known

as

148

Answer Sheet19. Goods market20. Factor market21. Spill over22. Dumping23. Invisible Hands24. Psychological & Subjective

approach