Explore topic-wise MCQs in Master of Arts in Economics (M.A. Economics).

This section includes 101 Mcqs, each offering curated multiple-choice questions to sharpen your Master of Arts in Economics (M.A. Economics) knowledge and support exam preparation. Choose a topic below to get started.

1.

According to ----------- when income increases by a small increment, it leads to increasingmarginal utility of income

A. kaldor
B. hicks
C. markowitz
D. friedman and savage
Answer» D. friedman and savage
Discussion
2.

A significant property of Cobb Douglas production function is that the elasticity ofsubstitution between inputs is

A. equal to 1
B. more than 1
C. less than 1
Answer» B. more than 1
Discussion
3.

If all resources used in the production of a product are increased by 20 percent and outputincreases by 20 percent, then there must be:

A. economies of scale
B. diseconomies of scale
C. constant returns to scale
D. increasing average total costs.
Answer» D. increasing average total costs.
Discussion
4.

When a firm doubles its inputs and finds that its output has more than doubled, this is knownas:

A. economies of scale
B. constant returns to scale
C. diseconomies of scale
D. a violation of the law of diminishing returns
Answer» B. constant returns to scale
Discussion
5.

The firm’s short-run marginal-cost curve is increasing when:

A. marginal product is increasing
B. marginal product is decreasing
C. total fixed cost is increasing
D. average fixed cost is decreasing
Answer» C. total fixed cost is increasing
Discussion
6.

If the short-run average variable costs of production for a firm are rising, then this indicatesthat:

A. average total costs are at a maximum
B. average fixed costs are constant
C. marginal costs are above average variable costs
D. average variable costs are below average fixed costs
Answer» D. average variable costs are below average fixed costs
Discussion
7.

The reason the marginal cost curve eventually increases as output increases for the typicalfirm is because:

A. of diseconomies of scale
B. of minimum efficient scale
C. of the law of diminishing returns
D. normal profit exceeds economic profit
Answer» D. normal profit exceeds economic profit
Discussion
8.

If you know that with 8 units of output, average fixed cost is Rs.12.50 and average variablecost is Rs.81.25, then total cost at this output level is:

A. rs.93.75
B. rs.97.78
C. rs.750
D. rs.880
Answer» D. rs.880
Discussion
9.

With fixed costs of Rs.400, a firm has average total costs of Rs.3 and average variable costsof Rs.2.50. Its output is:

A. 200 units
B. 400 units
C. 800 units
D. 1600 units
Answer» D. 1600 units
Discussion
10.

Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used toproduce it. Which is true?

A. the firm will earn accounting and economic profits
B. the firm will face accounting and economic losses
C. the firm will face an accounting loss, but earn economic profits
D. the firm may earn accounting profits, but will face economic losses
Answer» E.
Discussion
11.

If a firm’s revenues just cover all its opportunity costs, then:

A. normal profit is zero
B. economic profit is zero
C. total revenues equal its explicit costs
D. total revenues equal its implicit costs
Answer» C. total revenues equal its explicit costs
Discussion
12.

A firm that is threatened by the potential entry of competitors into a market builds excessproduction capacity. This is an example of

A. a prisoners’ dilemma
B. collusion
C. a credible threat
D. tit-for-tat
Answer» D. tit-for-tat
Discussion
13.

Which of the following legal restrictions, if enforced effectively, would be likely to solve aprisoners’ dilemma type of problem for the firms involved?

A. a law that prevents a cartel from enforcing rules against cheating
B. a law that makes it illegal for oligopolists to engage in collusion
C. a law that prohibits firms in an industry from advertising their services
D. all of the above would be likely to solve a prisoners\ dilemma for the firms
Answer» D. all of the above would be likely to solve a prisoners\ dilemma for the firms
Discussion
14.

Until recently, medical doctors and lawyers have been prohibited from engaging incompetitive advertising. If the prisoners’ dilemma applies to this situation, then the presence of this restriction would be likely to

A. increase profits earned by individuals in these professions
B. reduce profits earned by individuals in these professions
C. have no effect on the profits earned by individuals in these professions
D. increase the profits of some and reduce the profits of other individuals in these professions
Answer» B. reduce profits earned by individuals in these professions
Discussion
15.

A prisoners’ dilemma is a game with all of the following characteristics except one. Whichone is present in a prisoners’ dilemma?

A. players cooperate in arriving at their strategies
B. both players have a dominant strategy
C. both players would be better off if neither chose their dominant strategy
D. the payoff from a strategy depends on the choice made by the other player
Answer» B. both players have a dominant strategy
Discussion
16.

In game theory, a choice that is optimal for a firm no matter what its competitors do isreferred to as

A. the dominant strategy
B. the game-winning choice
C. super optimal
D. a gonzo selection
Answer» B. the game-winning choice
Discussion
17.

A consumer is in equilibrium and is spending income in such a way that the marginal utility ofproduct X is 40 units and Y is 16 units. The unit price of X is Rs.5. The price of Y is:

A. rs.1 per unit.
B. rs.2 per unit.
C. rs.3 per unit.
D. rs.4 per unit.
Answer» C. rs.3 per unit.
Discussion
18.

A consumer with a fixed income will maximize utility when each good is purchased inamounts such that the:

A. total utility is the same for each good.
B. marginal utility of each good is maximized.
C. marginal utility per dollar spent is the same for all goods.
D. marginal utility per dollar spent is maximized for each good.
Answer» D. marginal utility per dollar spent is maximized for each good.
Discussion
19.

If there is excess capacity in a production facility, it is likely that the firm’s supply curve is:

A. price inelastic
B. none of these answers
C. unit price elastic
D. price elastic
Answer» E.
Discussion
20.

If a small percentage increase in the price of a good greatly reduces the quantity demandedfor that good, the demand for that good is

A. income inelastic.
B. price inelastic.
C. price elastic.
D. unit price elastic.
Answer» D. unit price elastic.
Discussion
21.

If an increase in consumer incomes leads to a decrease in the demand for camping equipment,then camping equipment is:

A. a normal good.
B. an inferior good.
C. a substitute good
D. a complementary good.
Answer» D. a complementary good.
Discussion
22.

According to ----------- when income increases by a small increment, it leads to increasing marginal utility of income

A. kaldor
B. hicks
C. markowitz
D. friedman and savage
Answer» D. friedman and savage
Discussion
23.

--------- goods violate the law of demand after prices have risen above a certain level

A. normal goods
B. snob goods
C. veblen goods
D. bandwagon goods
Answer» D. bandwagon goods
Discussion
24.

CES production function is

A. homogeneous
B. linearly homogeneous
C. linearly non homogeneous
D. none of the above
Answer» C. linearly non homogeneous
Discussion
25.

A significant property of Cobb Douglas production function is that the elasticity of substitution between inputs is

A. equal to 1
B. more than 1
C. less than 1
Answer» B. more than 1
Discussion
26.

If the marginal product of labour is below the average product of labour. It must be true that:

A. marginal product of labour is negative
B. marginal product of labour is zero
C. average product of labour is falling
D. average product of labour is negative
Answer» D. average product of labour is negative
Discussion
27.

Diminishing marginal returns implies:

A. decreasing average variable costs
B. decreasing marginal costs
C. increasing marginal costs
D. decreasing average fixed costs
Answer» D. decreasing average fixed costs
Discussion
28.

Law of variable proportion is valid when:

A. only one input is fixed and all other inputs are kept variable
B. all factors are kept constant
C. all inputs are varied in the same proportion
D. none of these
Answer» B. all factors are kept constant
Discussion
29.

Increasing returns to scale can be explained in terms of:

A. external and internal economies
B. external and internal diseconomies
C. external economics and internal diseconomies
D. all of these
Answer» B. external and internal diseconomies
Discussion
30.

At the point of inflexion, the marginal product is:

A. increasing
B. decreasing
C. maximum
D. negative
Answer» D. negative
Discussion
31.

An isoquant is ______ to an iso cost line at equilibrium point:

A. convex
B. concave
C. tangent
D. perpendicular
Answer» D. perpendicular
Discussion
32.

The marginal product curve is above the average product curve when the average product is :

A. increasing
B. decreasing
C. constant
D. none
Answer» B. decreasing
Discussion
33.

Isoquants are equal to:

A. product lines
B. total utility lines
C. cost lines
D. revenue lines
Answer» B. total utility lines
Discussion
34.

______ shows the overall output generated at a given level of input:

A. cost function
B. production function
C. iso cost
D. marginal rate of technical substitution
Answer» C. iso cost
Discussion
35.

If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be:

A. economies of scale
B. diseconomies of scale
C. constant returns to scale
D. increasing average total costs.
Answer» D. increasing average total costs.
Discussion
36.

The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of:

A. economies of scale
B. normative economies
C. diminishing marginal returns
D. an increasing marginal product of labour
Answer» B. normative economies
Discussion
37.

When a firm doubles its inputs and finds that its output has more than doubled, this is known as:

A. economies of scale
B. constant returns to scale
C. diseconomies of scale
D. a violation of the law of diminishing returns
Answer» B. constant returns to scale
Discussion
38.

The firm’s short-run marginal-cost curve is increasing when:

A. marginal product is increasing
B. marginal product is decreasing
C. total fixed cost is increasing
D. average fixed cost is decreasing
Answer» C. total fixed cost is increasing
Discussion
39.

If the short-run average variable costs of production for a firm are rising, then this indicates that:

A. average total costs are at a maximum
B. average fixed costs are constant
C. marginal costs are above average variable costs
D. average variable costs are below average fixed costs
Answer» D. average variable costs are below average fixed costs
Discussion
40.

The reason the marginal cost curve eventually increases as output increases for the typical firm is because:

A. of diseconomies of scale
B. of minimum efficient scale
C. of the law of diminishing returns
D. normal profit exceeds economic profit
Answer» D. normal profit exceeds economic profit
Discussion
41.

With fixed costs of Rs.400, a firm has average total costs of Rs.3 and average variable costs of Rs.2.50. Its output is:

A. 200 units
B. 400 units
C. 800 units
D. 1600 units
Answer» D. 1600 units
Discussion
42.

If you know that with 8 units of output, average fixed cost is Rs.12.50 and average variable cost is Rs.81.25, then total cost at this output level is:

A. rs.93.75
B. rs.97.78
C. rs.750
D. rs.880
Answer» D. rs.880
Discussion
43.

When marginal product reaches its maximum, what can be said of total product?

A. total product must be at its maximum
B. total product starts to decline even if marginal product is positive
C. total product is increasing if marginal product is still positive
D. total product levels off
Answer» D. total product levels off
Discussion
44.

The marginal product of labour curve shows the change in total product resulting from a:

A. one-unit increase in the quantity of a particular resource used, letting other resources vary
B. one-unit increase in the quantity of a particular resource used, holding constant other resources
C. change in the cost of a variable resource
D. change in the cost of a fixed resource
Answer» C. change in the cost of a variable resource
Discussion
45.

The law of diminishing returns states that:

A. as a firm uses more of a variable resource, given the quantity of fixed resources, the average product of the firm will increase
B. as a firm uses more of a variable resource, given the quantity of fixed resources, marginal product of the firm will eventually decrease
C. in the short run, the average total costs of the firm will eventually diminish
D. in the long run, the average total costs of the firm will eventually diminish
Answer» C. in the short run, the average total costs of the firm will eventually diminish
Discussion
46.

Suppose a firm sells its product at a price lower than the opportunity cost of the inputs used to produce it. Which is true?

A. the firm will earn accounting and economic profits
B. the firm will face accounting and economic losses
C. the firm will face an accounting loss, but earn economic profits
D. the firm may earn accounting profits, but will face economic losses
Answer» E.
Discussion
47.

If a firm’s revenues just cover all its opportunity costs, then:

A. normal profit is zero
B. economic profit is zero
C. total revenues equal its explicit costs
D. total revenues equal its implicit costs
Answer» C. total revenues equal its explicit costs
Discussion
48.

A firm that is threatened by the potential entry of competitors into a market builds excess production capacity. This is an example of

A. a prisoners’ dilemma
B. collusion
C. a credible threat
D. tit-for-tat
Answer» D. tit-for-tat
Discussion
49.

Sequential games can be solved using

A. tit-for-tat
B. dominated strategies
C. backward induction
D. risk averaging
Answer» D. risk averaging
Discussion
50.

A game that involves multiple moves in a series of identical situations is called a

A. sequential game
B. repeated game
C. zero-sum game
D. nonzero-sum game
Answer» C. zero-sum game
Discussion