AC and TC
AC and VC
AC and AR
AC and TR
✅ The correct answer is C.
The average profit is the difference between AC and AR.
The average profit is the difference between AC and AR.
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.
52. Which of the following is a cause of an economic problem?
Scarcity of resources
Alternative uses
Unlimited wants
All of the above
✅ The correct answer is D.
Scarcity of resources, Alternative uses and Unlimited wants are the cause of an economic problem. Factors like production costs and labor affect the cost of scarce items. If the unlimited wants and needs of a particular good can be met by resources, then it is not considered scarce. This would require the resources to be unlimited as well for it to meet unlimited demand.
Scarcity of resources, Alternative uses and Unlimited wants are the cause of an economic problem. Factors like production costs and labor affect the cost of scarce items. If the unlimited wants and needs of a particular good can be met by resources, then it is not considered scarce. This would require the resources to be unlimited as well for it to meet unlimited demand.
53. The cost which a firm incurs for purchasing or hiring factors is called
Implicit
Explicit
Real
Nominal
✅ The correct answer is B.
54. Mr. Raees Ahamd bought 50 litres of petrol when his monthly income was Rs.25000. Now his monthly income has risen to Rs.50,000 and he purchases 100 litres of petrol. His income elasticity of demand for petrol is
1
100%
Less than 1
More than 1
✅ The correct answer is A.
Mr. Raees Ahamd bought 50 litres of petrol when his monthly income was Rs.25000. Now his monthly income has risen to Rs.50,000 and he purchases 100 litres of petrol. His income elasticity of demand for petrol is 1.
Mr. Raees Ahamd bought 50 litres of petrol when his monthly income was Rs.25000. Now his monthly income has risen to Rs.50,000 and he purchases 100 litres of petrol. His income elasticity of demand for petrol is 1.
55. Which is a condition for existence of monopoly?
Big size
Identical product
Absence of government taxes
No close substitute
✅ The correct answer is D.
No close substitute is a condition for existence of monopoly. If a close substitute exists, then the monopoly cannot exist. Remember, a monopoly can only exist when the cross-elasticity of the product that the monopolist produces is zero.
No close substitute is a condition for existence of monopoly. If a close substitute exists, then the monopoly cannot exist. Remember, a monopoly can only exist when the cross-elasticity of the product that the monopolist produces is zero.
56. For ____ goods, increase in income leads to increase in demand.
Abnormal
Normal
Inferior
Superior
✅ The correct answer is B.
For normal goods, increase in income leads to increase in demand. Rising incomes lead to a rise in the number of goods demanded by consumers.
For normal goods, increase in income leads to increase in demand. Rising incomes lead to a rise in the number of goods demanded by consumers.
57. Excess capacity is not found under
Monopoly
Monopolistic competition
Perfect competition
Oligopoly
✅ The correct answer is C.
Excess capacity is not found under Perfect competition. Under perfect competition, each firm produces at the minimum point on its LAC curve and its horizontal demand curve is tangent to it at that point. Its output is ideal and there is no excess capacity in the long-run.
Excess capacity is not found under Perfect competition. Under perfect competition, each firm produces at the minimum point on its LAC curve and its horizontal demand curve is tangent to it at that point. Its output is ideal and there is no excess capacity in the long-run.
58. Which statement is true
ATC + AVC = AFC
ATC + MC = AFC
ATC + AFC = AVC
AFC + AVC = ATC
✅ The correct answer is D.
AFC + AVC = ATC is true.
AFC + AVC = ATC is true.
59. Under which of the following forms of market structure does a firm have no control over the price of its product?
Monopoly
Monopolistic competition
Oligopoly
Perfect competition
✅ The correct answer is D.
Under Perfect competition forms of market structure does a firm have no control over the price of its product. 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
Under Perfect competition forms of market structure does a firm have no control over the price of its product. 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
60. In short run, a firm in monopolistic competition
Always earns profits
Incurs losses
Earns normal profit only
May earn normal profit, super normal profit or incur losses
✅ The correct answer is D.
In short run, a firm in monopolistic competition may earn normal profit, super normal profit or incur losses. In the short run, a monopolistically competitive firm maximizes profit or minimizes losses by producing that quantity that corresponds to when marginal revenue = marginal cost. If average total cost is below the market price, then the firm will earn an economic profit.
In short run, a firm in monopolistic competition may earn normal profit, super normal profit or incur losses. In the short run, a monopolistically competitive firm maximizes profit or minimizes losses by producing that quantity that corresponds to when marginal revenue = marginal cost. If average total cost is below the market price, then the firm will earn an economic profit.