1. In Economics, we use the term scarcity to mean:
a. Absolute scarcity and lack of resources in less developed countries
b. Relative scarcity i.e. scarcity in relation to the wants of the society
c. Scarcity during times of business failure and natural calamities
d. Scarcity caused on account of excessive consumption by the rich

2. Economics is a Science which deals with wealth was referred by:
a. Alfred Marshal
b. J. B. Say
c. Adam Smith
d. A.C. Pigou

3. Which of the following is a cause of an economic problem?
a. Scarcity of Resources
b. Unlimited wants
c. Alternative uses
d. All of the above

4. The Law of Scarcity:
a. Does not apply to rich, developed countries
b. Does not apply to poor, underdeveloped countries
c. Implies only to socialist economies
d. Implies that all consumer wants will never be completely satisfied

5. Scarcity definition of economics is given by:
a. Alfred Marshall
b. J. B. Say
c. Allen and Hicks
d. Robbins

6. The definition “Science which deals with wealth” was given by:
a. Alfred Marshall
b. A.C. Pigou
c. Adam Smith
d. J. B. Say

7. When we study why saving rates are high or low, we are studying:
a. Macro Economics
b. Micro Economics
c. Econometrics
d. Both (a) and (b)

8. Which of the following is not a central problem of the economy?
a. How to produce?
b. When to produce?
c. What to produce?
d. For whom to produce?

9. Macro economics is the study of:
a. Inflation
b. Unemployment
c. Growth
d. All of the above

10. Economists regard decision making as important because:
a. The resources required to satisfy our unlimited wants and needs are finite, or scarce
b. It is crucial to understand how we can best allocate our scarce resources to satisfy society’s unlimited wants and needs
c. Resources have alternative uses
d. All of the above

11. Business Economics is:
a. Abstract and applies the tools of Microeconomics
b. Involves practical application of economic theory in business decision making
c. Incorporates tools from multiple disciplines
d. (b) and (c) above

12. Macroeconomics is also called——— economics:
a. applied
b. aggregate
c. experimental
d. none of the above

13. An example of ‘positive’ economic analysis would be:
a. an analysis of the relationship between the price of food and the quantity purchased
b. determining how much income each person should be guaranteed
c. determining the ‘fair’ price for food
d. deciding how to distribute the output of the economy

14. A study of how increases in the corporate income tax rate will affect the national unemployment rate is an example of:
a. Macro-Economics
b. Descriptive Economics
c. Micro-economics
d. Normative economics

15. What implication(s) does resource scarcity have for the satisfaction of wants?
a. Not all wants can be satisfied
b. We will never be faced with the need to make choices
c. We must develop ways to decrease our individual wants
d. The discovery of new natural resources is necessary to increase our ability to satisfy wants

Answer Key

1. b
2. b
3. d
4. d
5. d
6. d
7. a
8. b
9. d
10. d
11. d
12. b
13. a
14. a
15. a

Unit 2

1. What should be the level of national income, what should be the wage rate fall within the scope of:
a. Positive Science
b. Normative Science
c. Both (a) and (b)
d. None of the above

2. Which of the following is not one of the features of capitalist economy?
a. Right of private property
b. Freedom of choice by the consumers
c. No profit, No Loss motive
d. Competition

3. Which economy is now a myth only, as no country in the world is having that type of economy?
a. Capitalist Economy
b. Socialist Economy
c. Mixed Economy
d. None of the above

4. In Economics, the central economic problem means:
a. Output is restricted to the limited availability of resources
b. Consumer do not have as much money as they would wish
c. There will always be certain level of unemployment
d. Resources are not always allocated in an optimum way

5. Scarcity definition of Economics is given by:
a. Alfred Marshall
b. Samuelson
c. Robinson
d. Adam Smith

6. The definition “Science which deals with wealth of Nation” was given by:
a. Alfred Marshall
b. A C Pigou
c. Adam Smith
d. J B Say

7. The central problem in economics is that of:
a. comparing the success of command versus market economies
b. guaranteeing that production occurs in the most efficient manner
c. guaranteeing a minimum level of income for every citizen
d. allocating scarce resources in such a manner that society’s unlimited needs or wants are satisfied in the best possible manner

8. The difference between positive and normative Economics is:
a. Positive Economics explains the performance of the economy while normative Economics finds out the reasons for poor performance
b. Positive Economics describes the facts of the economy while normative Economics involves evaluating whether some of these are good or bad for the welfare of the people
c. Normative Economics describes the facts of the economy while positive Economics involves evaluating whether some of these are good or bad for the welfare of the people
d. Positive Economics prescribes while normative Economics describes

9. Which of the following is not within the scope of Business Economics?
a. Capital Budgeting
b. Risk Analysis
c. Business Cycles
d. Accounting Standards

10. Which of the following statements is incorrect?
a. Business economics is normative in nature
b. Business Economics has a close connection with statistics
c. Business Economist need not worry about macro variables
d. Business Economics is also called Managerial Economics

11. The branch of economic theory that deals with the problem of allocation of resources is: a. Micro-Economic theory
b. Macro-economic theory
c. Econometrics
d. none of the above

12. Which of the following is not the subject matter of Business Economics?
a. Should our firm be in this business?
b. How much should be produced and at price should be kept?
c. How will the product be placed in the market?
d. How should we decrease unemployment in the economy?

13. Which of the following is a normative economic statement?
a. Unemployment rate decreases with industrialization
b. Economics is a social science that studies human behaviour
c. The minimum wage should be raised to ` 200/- per day
d. India spends a huge amount of money on national defence

14. Which of the following would be considered a topic of study in Macroeconomics? a. The effect of increase in wages on the profitability of cotton industry
b. The effect on steel prices when more steel is imported
c. The effect of an increasing inflation rate on living standards of people in India
d. The effect of an increase in the price of coffee on the quantity of tea consumed
15. Which of the following is not a subject matter of Micro-economies?
a. The price of mangoes
b. The cost of producing a fire truck for the fire department of Delhi, India
c. The quantity of mangoes produced for the mangoes market
d. The national economy’s annual rate of growth
Answer Key
1. b
2. c
3. b
4. a
5. c
6. c
7. d
8. b
9. d
10. c
11. a
12. d
13. c
14. c
15. d

Unit 3

1. In a free market economy, the allocation of resources is determined by:
a. voting done by consumers
b. a central planning authority
c. consumer preferences
d. the level of profits of firms

2. A capitalist economy uses ____________________ as the principal means of allocating resources:
a. demand
b. supply
c. efficiency
d. prices

3. Which of the following statements does not apply to a market economy?
a. Firms decide whom to hire and what to produce
b. Firms aim at maximizing profits
c. Households decide which firms to work for and what to buy with their incomes
d. Government policies are the primary forces that guide the decisions of firms and households

4. In a mixed economy:
a. all economic decisions are taken by the central authority
b. all economic decisions are taken by private entrepreneurs
c. economic decisions are partly taken by the state and partly by the private entrepreneurs
d. none of the above

5. Capital intensive technique would get chosen in a:
a. labour surplus economy where the relative price of capital is lower
b. capital surplus economy where the relative price of capital is lower
c. developed economy where technology is better
d. developing economy where technology is poor

6. Which of the following is not one of the four central questions that the study of economics is supposed to answer?
a. Who produces what?
b. When are goods produced?
c. Who consumes what?
d. How are goods produced?

7. Larger production of ____ goods would lead to higher production in future:
a. consumer goods
b. capital goods
c. agricultural goods
d. public goods

8. The economic system in which all the means of production are owned and controlled by private individuals for profit:
a. Socialism
b. Capitalism
c. Mixed economy
d. Communism

9. Macro Economics is the study of ________________________:
a. all aspects of scarcity
b. the national economy and the global economy as a whole
c. big businesses
d. the decisions of individual businesses and people

10. Freedom of choice is the advantage of:
a. Socialism
b. Capitalism
c. Communism
d. None of the above

11. Exploitation and inequality are minimal under:
a. Socialism
b. Capitalism
c. Mixed economy
d. None of the above

12. Administered prices refer to:
a. Prices determined by forces of demand and supply
b. Prices determined by sellers in the market
c. Prices determined by an external authority which is usually the government
d. None of the above

13. Economic goods are considered scarce resources because they:
a. cannot be increased in quantity
b. do not exist in adequate quantity to satisfy the requirements of the society
c. are of primary importance in satisfying social requirements
d. are limited to man-made goods

14. Which of the following does not suggest a macro approach for India?
a. Determining the GNP of India
b. Finding the causes of failure of ABC Ltd
c. Identifying the causes of inflation in India
d. Analyse the causes of failure of industry in providing large-scale employment

15. “Ram: My corn harvest this year is poor.
Krishan: Don’t worry. Price increases will compensate for the fall in quantity supplied.
Vinod: Climate affects crop yields. Some years are bad, others are good.
Madhu: The Government ought to guarantee that our income will not fall.”
In this conversation, the normative statement is made by:
a. Ram
b. Krishan
c. Vinod
d. Madhu

Answer Key

1. c
2. d
3. d
4. c
5. b
6. b
7. b
8. b
9. b
10. b
11. a
12. c
13. b
14. b
15. d

Unit 4

1. The benefit of economic study is:
a. It ensures that all problems will be appropriately tackled
b. It helps in identifying problems
c. It enables to examine a problem in its right perspective
d. It gives exact solutions to every problem

2. The managerial economics:
a. Is Applied Economics that fills the gap between economic theory and business practice
b. Is just a theory concept
c. Trains managers how to behave in recession
d. Provides the tools which explain various concepts

3. Which of the following statements is correct?
a. Micro economics is important for the study of a particular household and a particular firm
b. Macro economics is important for the study of economic conditions of a country
c. None of the above
d. Both a and b

4. Which of the following is not one of the features of capitalist economy?
a. Right of private property
b. Freedom of choice by the consumers
c. No profit, No Loss motive
d. Competition

5. There is a need for economic study, because:
a. The resources are limited
b. The wants are unlimited
c. The resources are unlimited
d. Both a and b

6. Mr. Satish hired a business consultant to guide him for the growth of his business. The consultant visited his factory and suggested some changes with respect to staff appointment, loan availability, and so on. Which approach is that consultant using? a. Micro economics
b. Macro economics
c. None of the above
d. Both a and b

7. Profit motive is a merit of:
a. Socialism
b. Capitalism
c. Mixed economy
d. None of the above

8. _______ is also called as command economy:
a. Socialist
b. Capitalist
c. Mixed economy
d. None of the above

9. Which of the following is a normative statement?
a. Planned economies allocate resources via government departments
b. Most transitional economies have experienced problems of falling output and rising prices over the past decade
c. There is a greater degree of consumer sovereignty in market economies than planned economies
d. Reducing inequality should be a major priority for mixed economies

10. In every economic system, scarcity imposes limitations on:
a. households, business firms, governments, and the nation as a whole
b. households and business firms, but not the governments
c. local and state governments, but not the federal government
d. households and governments, but not business firms

11. Consider the following and decide which, if any, economy is without scarcity:
a. The pre-independent Indian economy, where most people were farmers
b. A mythical economy where everybody is a billionaire
c. Any economy where income is distributed equally among its people
d. None of the above

12. Which of the following is considered a disadvantage of allocating resources using the market system?
a. Income will tend to be unevenly distributed
b. People do not get goods of their choice
c. Men of initiative and enterprise are not rewarded
d. Profits will tend to be low

13. Who was the father of Economics:
a. Marshall
b. Adam Smith
c. Robbins
d. Keynes

14. Normative Economic theory deals with:
a. What to produce
b. How to produce
c. Whom to produce
d. How the problem should be solved

15. Micro Economics theory deals with:
a. Economy as a whole
b. Individual units
c. Economic growth
d. All the above

16. In economics, goods include material things which:
a. can be transferred
b. can be visible
c. both A & B
d. None

17. Human wants are:
a. limited
b. unlimited
c. undefined
d. none

18. According to _______________ Economics is the study of science of wealth:
a. J.B. Say
b. Marshall
c. Adam Smith
d. Robbins

19. According to ___________ definition, economics is a social science:
a. scarcity
b. welfare
c. growth
d. none

20. According to ___________ top priority is given to man:
a. J.B. Say
b. Keynes
c. Marshall
d. Adam Smith

21. According to Robbins, Economics must be —————- between ends:
a. favorable
b. unfavorable
c. none
d. neutral

22. According to —————— definition, Economics is an analytical science: a. growth
b. welfare
c. scarcity
d. none

23. Growth definition is mostly associated with:
a. Marshall
b. P.A. Samuelson
c. Robbins
d. Keynes

24. ——————— definition includes welfare definition and scarcity definition: a. Growth
b. scarcity
c. welfare
d. none

25. Point elasticity was propounded by:
a. Adam Smith
b. Marshall
c. Robbins
d. Keynes

Answer Key
1. c
2. a
3. d
4. c
5. d
6. a
7. b
8. a
9. d
10. a
11. d
12. a
13. b
14. d
15. b
16. c
17. b
18. a
19. b
20. c
21. d
22. c
23. b
24. a
25. b