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.

231. Total utility is maximum when

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Marginal utility is zero
Marginal utility is at its highest point
Marginal utility is equal to average
Average utility is maximum
✅ The correct answer is A.
Total utility is maximum when Marginal utility is zero. It is based in the law of diminishing marginal utility which says ‘as more and more units of a good are consumed, MU i.e level of satisfaction derived from each successive unit goes on falling because desire for that commodity tend to fall.

233. Price-taking firms i.e., firms that operate in a perfectly competitive market, are said to be ‘small’ relative to the market. Which of the following best describes this smallness?

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The individual firm must have fewer than 10 employees
The individual firm faces a downward-sloping demand curve
The individual firm has assets less than Rs. 20 lakhs
The individual firm is unable to affect market price through its output decisions
✅ The correct answer is D.
The individual firm is unable to affect market price through its output decisions best describes this smallness.

234. The ‘substitution effect’ takes place due to change in

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Income of the consumers
Prices of the commodity
Relative prices of the commodities
All of the above
✅ The correct answer is C.
The ‘substitution effect’ takes place due to change in Relative prices of the commodities. The substitution effect refers to the change in demand for a good as a result of a change in the relative price of the good in terms of other goods.

235. In monopoly and perfect competition, the cost curves are

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Same
Different
Opposite
None of the above
✅ The correct answer is A.
In monopoly and perfect competition, the cost curves are same. In a monopoly, the price is set above marginal cost and the firm earns a positive economic profit. Perfect competition produces an equilibrium in which the price and quantity of a good is economically efficient.

236. Demand curve can be derived from

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MU curve
PCC
Both ‘a’ and ‘b’
None
✅ The correct answer is C.
Demand curve can be derived from MU curve and PCC. Marginal utility and the law of diminishing marginal utility can be used to provide insight into market demand, the law of demand, and the demand curve. Downward-sloping price consumption curve for a good means that demand for the good is elastic, upward-sloping price consumption curve means that demand for the good is inelastic and horizontal straight-line price consumption curve means that demand for the good is unit elastic.

237. One characteristic not typical of oligopolistic industry is

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Too much importance to non-price competition
Price leadership
Horizontal demand curve
A small number of firms in the industry
✅ The correct answer is C.
One characteristic not typical of oligopolistic industry is Horizontal demand curve. The horizontal demand curve indicates that the elasticity of demand for the good is perfectly elastic. This means that if any individual firm charged a price slightly above market price, it would not sell any products.

239. A factor of production, whose supply is fixed in the short run, may get additional earnings. These earnings are generally referred to as

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Surplus value
Quasi-rent
Transfer earnings
Super normal profits
✅ The correct answer is B.
A factor of production, whose supply is fixed in the short run, may get additional earnings. These earnings are generally referred to as Quasi-rent. The earnings from machines and instruments are termed as quasi-rent. The quasi-rent refers to the income produced when the demand for products increases suddenly.

240. At the point of equilibrium of firm (under perfect competition)

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MC curve must be rising
MC curve must be falling
MR cure must be rising
None of the above
✅ The correct answer is A.
At the point of equilibrium of firm (under perfect competition) MC curve must be rising. If the firm is producing at an output level where the MC is falling, then this implies that it can further increase the profit by slightly raising the level of output. Equilibrium is established at the point where the MR is equal to MC and MC is rising.