Economics

Economics MCQs with Answers and Explanations | Microeconomics & Macroeconomics Objective Questions.

Strengthen your knowledge of Economics with a rich collection of MCQs with answers and detailed explanations. Topics include microeconomics, macroeconomics, demand and supply, national income, inflation, monetary policy, fiscal policy, international trade, economic growth, and development economics. These multiple-choice questions are designed for students, teachers, and candidates preparing for competitive exams (CSS, PMS, NTS, FPSC, PPSC, UPSC, MBA, BBA, etc.). Each MCQ is supported by a clear solution and explanation to improve conceptual clarity, analytical ability, and exam performance. Perfect for self-assessment, practice, and revision in the field of Economics.

221. A necessity is defined as a good having

by
A positive income elasticity of demand
A negative income elasticity of demand
An income elasticity of demand between zero and 1
An income elasticity of more than 1
✅ The correct answer is C.
A necessity is defined as a good having an income elasticity of demand between zero and 1. If income elasticity of demand of a commodity is less than 1, it is a necessity good. If the elasticity of demand is greater than 1, it is a luxury good or a superior good. A zero income elasticity of demand occurs when an increase in income is not associated with a change in the demand of a good.

222. When marginal revenue is zero, total revenue is

by
Maximum
Minimum
Zero
Decreasing
✅ The correct answer is A.
When marginal revenue is zero, total revenue is Maximum. The profit maximizing quantity and price can be determined by setting marginal revenue equal to zero, which occurs at the maximal level of output. Marginal revenue equals zero when the total revenue curve has reached its maximum value.

223. A firm under perfect competition is

by
Price maker
Price breaker
Price taker
Price shaker
✅ The correct answer is C.
A firm under perfect competition is Price taker. In perfect market conditions (also called perfect competition) a firm is a price taker because other firms can enter the market easily and produce a product that is indistinguishable from every other firm’s product. This makes it impossible for any firm to set its own prices.

225. Demand for intermediate consumption arises in

by
Household sector only
Government sector only
Corporate sector only
All producing sectors of the economy
✅ The correct answer is D.
Demand for intermediate consumption arises in all producing sectors of the economy. Intermediate consumption is a national accounts concept which measures the value of the goods and services consumed as inputs by a process of production.

226. An ISO-product slopes

by
Downward to the left
Downward to the right
Upward to the left
Upward to the right
✅ The correct answer is B.
An ISO-product slopes downward to the right. They slope downward because MTRS of labour for capital diminishes. When we increase labour, we have to decrease capital to produce a given level of output.

227. Which of the following is NOT a characteristic of perfect competition?

by
Free entry and exit of the firms
The demand curve of firm is horizontal
The marginal revenue curve is horizontal
An individual firm can influence the price
✅ The correct answer is D.
An individual firm can influence the price is not a characteristic of perfect competition. All goods in a perfectly competitive market are considered perfect substitutes, and the demand curve is perfectly elastic for each of the small, individual firms that participate in the market. These firms are price takers–if one firm tries to raise its price, there would be no demand for that firm’s product.

228. Diminishing marginal utility is the basis of

by
Law of supply
Law of demand
Law of returns
None of the above
✅ The correct answer is B.
Diminishing marginal utility is the basis of Law of demand. When the price of a goods falls, downward sloping marginal utility curve implies that the consumers must buy more of the good so that its marginal utility falls and becomes equal to the new price.

230. The long run is a

by
Period of three years or longer
Period long enough to allow firms to change plant size and capacity
Period long enough to allow firm to make economic decisions
A period which affects larger than smaller firms
✅ The correct answer is B.
The period is long enough to allow firms to change plant size and capacity. The long run is a period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs.