question 1 A firm practising price discrimination will be

Answer Choices
Charging different prices for different qualities of product
Buying in the cheapest and selling in the dearest market.
Charging different prices in different markets of a product
Buying only from firms selling at a discount

Question - 2/60 In the context of circular flow of income and expenditure which of the following
statements is not correct?
Answer Choices
Firms sell factors of production to households
Households buy goods and services from business firms
Firms buy factors of production from households
The government taxes households and firms

Question - 3/60 For a given price level aggregate demand curve shifts if there is change in
(a)government expenditure (b)investment expenditure
Answer Choices
Only (a)
Only (b)
Both (a) and (b)
None of these but change in consumption expenditure

Question - 4/60 Golden rule of profit maximization says that a profit maximizing firm produces
Answer Choices
where marginal revenue equals marginal cost, provided marginal cost cuts marginal revenue
from above.
where marginal revenue equals marginal cost, provided marginal cost cuts marginal revenue
from below.
where average revenue equals average cost, provided average cost cuts average revenue from
below.
where average revenue equals average cost, provided average cost cuts average revenue from
above.

Question - 5/60 The steeper the short-run aggregate supply curve,

Answer Choices

the impact a shift of the aggregate demand curve will be more on real GDP and less on the price
level.
the impact a shift of the aggregate demand curve will be less on nominal GDP and more on the
price level.
the impact a shift of the aggregate demand curve will be less on real GDP and more on the price
level.
None of these

Question - 6/60 If marginal utility is zero:

Answer Choices
Total utility is zero
An additional unit of consumption will decrease total utility
An additional unit of consumption will increase total utility
Total utility is maximized

Question - 7/60
Statement A: A higher Herfindahl index value signifies increase in competition along with
increasing market power. Statement B: The Herfindahl index is considered to be ratio as it takes
all the firms into account.advantageous compared to concentration
Answer Choices
Only statement A is true.
Only statement B is true
Both statement A and statement B are true
Both statement A and statement B are false

Question - 8/60
When the price of a normal good falls, more of it is purchased because of
Answer Choices
The substitution effects
The income effects
Either the Substitution effect or the income effect
Both Substitution effect and income effect

Question - 9/60
A typical demand curve can not be
Answer Choices
a straight line

rising upward to right

concave from below
convex from below

Question - 10/60
An Indian company owns a fast-food store in Sri lanka. The value of the goods and services
produced in the store are Included
Answer Choices
In both Sri lanka?s GDP and India?s GDP.
In Sri lanka?s GDP, but not in India?s GDP.
In India?s GDP, but not in Sri lanka?s GDP.
Partly in Sri lanka?s GDP and partly in India?s GDP.

Question - 11/60
In perfect competition there is large number of sellers.
Answer Choices
Large number of sellers means at least 1000 sellers in the market.
Large number of sellers means infinite number of sellers in the market.
Large number of sellers means every seller is selling a small amount in relative sense.
Large number of sellers means every seller is selling a small amount in absolute sense.

Question - 12/60
In economics rational self interest means
Answer Choices
blind materialism, pure selfishness, or
greed.
individuals try to mimimize the expected benefit achieved with a given cost
individuals try to maximize the expected cost of achieving a given benefit.
individuals try to maximize the expected benefit achieved with a given cost or to minimize the
expected cost of achieving a given bene?t.

Question - 13/60
In economics market refers to
Answer Choices
physical places, such as supermarkets, department stores, shopping malls etc.

any mechanisms by which buyers and sellers communicate to exchange goods and services
Both option 1 and option 2
only product market and not to resource market

Question - 14/60
In the long run zero substitutability between the factor inputs is a feature of
Answer Choices
linear isoquant
Input output isoquant
Smooth convex isoquant
Kinked isoquant

Question - 15/60
A perfectly competitive firm producing 100 units of output per period fnds that: Average total
cost is $20; Average variable cost is $12; Marginal cost is $18 and increasing; Price of the
product is $15. This firm should
Answer Choices
produce more output
reduce production without shutting down
shut down (reduce output to zero)
do nothing (it is currently maximizing pro?t)

Question - 16/60
The Lerner index is defined as
Answer Choices
(price - cost)/cost
(cost - price)/price
(cost - price)/ cost
(price - cost)/price

Question - 17/60
In economics
Answer Choices
expected total benefit and expected total costs are compared to make a choice

expected average benefit and expected average costs are compared to make a choice
expected marginal benefit and expected marginal costs are compared to make a choice
affordability of the product and availability of the product are taken into account to make a
choice

Question - 18/60
Statement A: Money income is the amount of rupees received per period. Statement B: Change
in price level keeps the money income constant but may increase or decrease the real income.
Answer Choices
Both statement A and statement B are correct.
Both statement A and statement B are false.
Statement A is correct but statement B is not correct.
Statement A is not correct but statement B is correct.

Question - 19/60
If the GDP price index is 150 and nominal GDP is Rs.9,000 billion, then real GDP is
Answer Choices
Rs.135 billion.
Rs. 1,350 billion.
Rs. 600 billion.
Rs. 6,000 billion.

Question - 20/60
If Average cost (AC) is falling then
Answer Choices
marginal Cost (MC) less than Average Cost (AC)
marginal Cost (MC) equal to Average Cost (AC)
marginal Cost (MC) greater than Average Cost (AC)
the slope of Average Cost (AC) is increasing.

Question - 21/60
Average product remains positive (a)as long as total product is positive. (b)as long as marginal
product is positive.
Answer Choices

Both (a) and (b) are correct.

Only (a) is correct.
Only (b) is correct.
Both (a) and (b) are false.
Question - 22/60
If capital inputs are measured along the vertical axis and labour inputs are measured along the
vertical axis then upper ridge line denotes
Answer Choices
the points where marginal product of capital is zero
the points where marginal product of capital is one.
the points where marginal product of labour is zero
the points where marginal product of labour is one

Mark for Review

Mark Unattempted

Question - 23/60
Which of the following can increase real GDP per person?
Answer Choices
a decrease in population growth
foreign investment from abroad
policies to encourage international trade
All the options are correct.

Question - 24/60
(a) Economic information is usually scarce and costly to acquire.
(b) Economic information is usually not required for rational decision making.
Answer Choices
Both statement (a) and (b) are true.
Both statement (a) and (b) are false.
Statement(a) is true but statement (b) is false.

Statement(a) is false but statement (b) is true

Question - 25/60
Discretionary Fiscal Policy differs from automatic stablizer Fiscal Policy in the sense that
Answer Choices
The former deals with government spending and the latter deals with tax policy
The former is chosen by Congress while the latter is chosen by the President
The former is always stabilizing, while the latter is never stabilizing
The former often takes years to enact, while the latter takes effect automatically

Question - 26/60
The price elasticity of demand is the
Answer Choices
Ratio of the percentage change in price to the percentage change in quantity demanded.
Ratio of the change in price to the change in quantity demanded.
Ratio of the percentage change in quantity demanded to the percentage change in price.
Ratio of the percentage change in quantity demanded to the percentage change in price of related
good.
Question - 27/60
The price elasticity of supply is +4. The price increases by 15%. Sales were originally 200 units. What
will they be now?
Answer Choices
80 units
320 units
60 units
120 units

Question - 28/60
If marginal benefit is greater than marginal cost for an activity, a rational choice involves:
Answer Choices
no more of the activity.
more or less, depending on the benefits of other activities.
less of the activity.
more of the activity

Question - 29/60
Opportunity cost is
Answer Choices
the additional benefit of buying an additional unit of a product.
that which we forgo, or give up, when we make a choice or a decision.
the cost incurred in the past before we make a decision about what to do in the future.
a cost that cannot be avoided, regardless of what is done in the future

Question - 30/60
Green GDP means
Answer Choices
Measuring the impact of production on air pollution, water pollution, soil depletion, and the loss
of other natural resources.
Measuring the value of all green vegetables and forest products.
GDP of a country express in terms of USD dollar also known as green bucks informally.
Measuring GDP ignoring the impact of production on air pollution, water pollution, soil depletion,
and the loss of other natural resources.

Question - 31/60
A person finds Rs.2000 on the street. If he decides to use the money to go to an IPL match, his
opportunity cost of going to the game is
Answer Choices
nothing, because you found the money on the street.
Rs.2000 as he could have used the money to buy other things plus the value of his time spent at
the game.
Rs.2000 as he could have used the money to buy other things plus the value of his time spent at
the game. Plus the cost of snacks he purchased at the game.
Rs. 2000 because he could have used the money to buy other things.

Question - 32/60
Macroeconomics is the study of
Answer Choices

market regulation.
money and financial markets.

economy-wide phenomena.
how households and firms make decisions and how they interact.

Question - 33/60
Along a demand curve real income is assumed to be constant.
Answer Choices
always true
always false
sometimes true sometimes false
None of these

Question - 34/60
Expansion and contraction of demand mean
Answer Choices
Movement to a higher demand curve.
Movement to a lower demand curve
Movements along the same demand curve
All of these

Question - 35/60
Statement A: an increase in the price of pizza, other things constant, increases the opportunity
cost of pizza.
Statement B: Because of higher opportunity cost of pizza consumers will reduce demand for
other goods and increase the quantity demanded of pizza
Answer Choices
Both statement A and statement B are correct. And statement B is the right explanation of
statement A
Both statement A and statement B are correct. But statement B is not the right explanation of
statement A
Statement A is correct but statement B is not correct.
Statement A is not correct but statement B is correct.

Question - 36/60
In 2013, Mr. X earned a salary of Rs. 25,000 and he spent Rs. 24,000, thus saving Rs.1000. At
the end of the year, he received a bonus of Rs.1000 and he spent Rs.500 of it, saving the other
Rs. 500. What was his marginal propensity to consume?

Answer Choices
0.96
0.5
0.04
0.02

Question - 37/60
Statement A: Firms in monopolistic competition are not producing at minimum average cost.
Statement B: Firms in monopolistic competition have excess capacity
Answer Choices
Only statement A is true.
Only statement B is true
Both statement A and statement B are true
Both statement A and statement B are false

Question - 38/60
What effect is working when the price of pizza falls and consumers tend to buy it instead ofother
goods?
Answer Choices
the income effect.
the diminishing marginal utility effect.
the substitution effect.
the ceteris paribus effect.

Question - 39/60
MC = MR and MR = AR means
Answer Choices
The equilibrium position of a firm in the long period
The equilibrium position of a firm under imperfect competition
The equilibrium position of a firm under perfect competition
None of these

Question - 40/60
An increase in price from 25 paisa to 30 paisa leads to an increase in the quantity supplied from
40 units to 44 units. The price elasticity of supply is:

Answer Choices
2
0.5
-2
-0.5
Question - 41/60
If the income elasticity of a good is greater than one but less than zero then a) it is a normal good.
b) it is a necessary good. c) it is an inferior good.
Answer Choices
Only (a) is right.
Both (a) and (b) are right.
Both (b) and (c) are right.
All of these are right

uestion - 42/60
Firms under perfect competition in the short run can earn only
Answer Choices
Economic Profit
Normal profit
Loss
All of these

Question - 43/60
If (MUx / Px) > (MUy / Py) then
Answer Choices
the consumer will increase his consumption of X and decrease his consumption of Y.
the consumer will decrease his consumption of X and increase his consumption of Y.
the consumer will increase his consumption of both X and Y.
the consumer will decrease his consumption of both X and Y.

Question - 44/60
In which of the following industries do firms set prices?

Answer Choices
competitive markets, but not monopoly markets
monopoly markets, but not competitive markets
competitive and monopoly markets
neither competitive nor monopoly markets

Question - 45/60
Statement A: The price elasticity of demand varies along a downward sloping linear demand
curve. Statement B: This is because the slope of a linear demand curve changes from point to
point.
Answer Choices
Both statement A and statement B are correct. And statement B is the right explanation for
statement A.
Both statement A and statement B are correct. But statement B is not the right explanation of
statement A
Statement A is correct but statement B is not correct.
Statement A is not correct but statement B is correct.

Question - 46/60
If an increase in the price of product X shifts the demand for product Y rightward and,
conversely, if a decrease in the price of X shifts demand for Y leftward then
Answer Choices
X and Y are substitute products
X and Y are complementary products
X and Y are not related
X and Y both are inferior products

Question - 47/60
Upward or downward shift of the demand curve shows
Answer Choices
change in quantity demanded
change in price
change in supply
both change in quantity demanded and change in price

Question - 48/60
When GDP increases budget deficit
Answer Choices
decreases
increases
remains constant
none of these

Question - 49/60
A rational person who currently subscribes two magazines is trying to decide whether he should
subscribe to a third. What should determine his decision?
Answer Choices
The total cost of the three magazines compared to the total satisfaction the individual would
receive.
The total amount of satisfaction the person would get from the magazines.
The additional cost of the third magazine compared to the additional benefit the person would
get from the third magazine.
The cost of the third magazine, including the time it takes to read it.

Question - 50/60
Markets reduce transactions costs
Answer Choices
because each market uses the same set of rules for buying and selling goods and services
when prices are set by the sellers and are not determined by negotiation between the buyers
and the sellers
by decreasing the time spent searching for information about goods and services
only when the government can coordinate the plans of many buyers and sellers

Question - 51/60
The money demand curve slopes downward because
Answer Choices
the lower the interest rate, the higher the opportunity cost of holding money
the higher the interest rate, the lower the opportunity cost of holding money result of price
increases
the lower the interest rate, the lower the opportunity cost of holding money
None of these

Question - 52/60
Automatic stabilisers act to __________ government expenditures and __________ government
revenues during recessions.
Answer Choices
decrease; increase
increase; increase
decrease; decrease
increase; decrease

Question - 53/60
Statement A: The division of tax burden depends on elasticities of demand and supply. Statement
B: More inelastic the demand curve and more elastic the supply curve, the larger is the burden on
consumer.
Answer Choices
Both statement A and statement B are true.
Both statement A and statement B are false
Statement A is true but statement B is false.
Statement A is false but statement B is true.

Question - 54/60
Which of the following is least likely a feature that monopolistic competition and perfect
competition have in common?
Answer Choices
Output occurs where MR = MC
Zero economic profit in the long run
Extensive advertising to differentiate products
Large number of buyers and sellers

uestion - 55/60
In the second stage of short run production
Answer Choices
elasticity of production is greater than one.
elasticity of production is less than one but greater than zero.

elasticity of production is greater than one but less than infinity.

elasticity of production is less than zero.

Question - 56/60
Marginal product is
Answer Choices
the produce when all factor inputs are employed at optimum efficiency
annual output of the most efficient firm
the extra output obtained from employing an additional unit of a factor
None of these

Question - 57/60
Elasticity of production is
Answer Choices
percentage change in variable input due to percentage change in output.
percentage change in output due to percentage change in variable input.
percentage change in output due to percentage change in price.
Proportionate change in quantity demanded as a result of proportionate change in price of the
product.

Question - 58/60
Marginal utility curve of a consumer is also his
Answer Choices
supply curve
demand curve
total utility curve
none of these

Question - 59/60
At any given price level which of the following is not going to increase real GDP demanded
Answer Choices
an increase in transfer payments
an increase in net taxes
an increase in government purchases

All of these.