Economics (Part – II)

Total Questions: 50

1. The minimum price at which I was willing to sell my old TV was Rs 7,000. I quoted Rs 12,000 while selling it, but it was sold for Rs 10,500. This transaction generated - [S.S.C. Online CHSL (T-I) 11.01.2017(Shift-I)]

Correct Answer: (d) Rs 3500 worth of producer surplus
Solution:The difference between the price at which a producer is ready to sell a commodity and the price at which he sells it is the producer's surplus.

Minimum selling price of TV = Rs.7000

Notional cost of TV = Rs 12000

Actual selling price of TV = Rs 10500

Hence the surplus generated on the sale of TV ⇒ Actual selling price of TV - Minimum selling price of TV

⇒ 10500 - 7000 = Rs 3500

Hence, the producer surplus is Rs 3500.

2. The minimum price at which I was willing to sell my old TV was Rs. 37,000. I quoted Rs. 50,000 while selling it, but it sold for Rs. 42,000. This transaction generated______ . [S.S.C. Online CHSL (T-I) 18.01.2017(Shift-I)]

Correct Answer: (c) Rs. 5000 worth of producer surplus5000
Solution:Minimum selling price of TV = Rs. 37,000

Notional cost of TV = Rs. 50,000

Actual selling price of TV = Rs. 42,000

Surplus on TV sales = Actual selling price of TV - Minimum selling price of TV

⇒ 42,000 - 37000 = Rs. 5000

Hence a surplus of Rs. 5000 was generated from the sale of TV.

3. Calculate the accounting profits for a firm, if its economic profits for the year are Rs. 60 crores, total implicit costs are Rs. 18.5 crores and total explicit costs are Rs. 35 crores. [S.S.C. Online CHSL (T-I) 23.01.2017(Shift-I)]

Correct Answer: (d) Rs. 78.5 crores
Solution:Economic profit = Total income - (Total implicit cost + Total explicit cost) or Total Income = Economic Profit - Total Implicit Cost + Total Explicit Cost + Total Explicit Cost

Total income = 60+18.5+35 = Rs 113.5  crore

Accounting Profit = Total Income - Total Explicit Cost ⇒ 113.5-35 = Rs 78.5 crore

4. An increase of 1% per annum in the rate of growth of the money supply will increase inflation in the long run by______ . [S.S.C. Online CHSL (T-I) 8.02.2017(Shift-III)]

Correct Answer: (b) One percent
Solution:In the long run, Inflation = Money growth.

The inflation rate is directly proportional to money growth, which is referred to as the quantity theory of money.

5. 'Agronomy' is the practice of raising_______ . [S.S.C. Online C.G.L. (T-I) 3.09.2016 (Shift-III)]

Correct Answer: (a) Plants and Animals
Solution:Agronomy is the science and technology of producing and using plants for food, fuel, fiber, and land reclamation. Agronomy has come to encompass work in the areas of plant genetics, plant physiology, meteorology, and soil science.

6. Which one of the following is not an instrument of fiscal policy? [S.S.C. Online C.G.L.(T-I) 10.09.2016 (Shift-I)]

Correct Answer: (a) Open Market Operations
Solution:Some of the major instruments of fiscal policy are as follows: Budget, Taxation, Public Expenditure, Public Works, and Public Debt. Fiscal policy is the use of government spending, taxation and transfer payments to influence aggregate demand.

7. Which one is not the main objective of fiscal policy in India? [S.S.C. Online C.G.L. (T-I) 27.08.2016 (Shift-III)]

Correct Answer: (a) To increase liquidity in the economy
Solution:Increasing liquidity in the economy is not the main objective of the Fiscal Policy in India.

8. In which of the following market forms, a firm does not exercise control over price? [S.S.C. Online C.G.L.(T-I) 10.09.2016 (Shift-I)]

Correct Answer: (b) Perfect competition
Solution:In perfect competition, the existence of a large number of firms producing and selling the product ensures that an individual firm exercises no influence over the price of the product. The output of an individual firm constitutes a very small fraction of the total output of the whole industry so any increase or decrease in output by an individual firm has a negligible effect on the total supply of products of the industry. As a result, a single firm is not in a position to influence the price of the product by increasing or reducing its output.

9. Open Market Operations refer to______ . [S.S.C. Online C.G.L. (T-I) 2.09.2016 (Shift-II)]

Correct Answer: (c) Purchase and sale of Government securities by RBI
Solution:Open market operations refer to central bank purchases or sales of government securities in order to expand or contract money in the banking system and influence interest rates.

10. Which of the following will not be traded in a commodity market? [S.S.C. Online CHSL (T-I) 24.01.2017 (Shift-III)]

Correct Answer: (c) Currency
Solution:A Commodity market is traded in the exchange of commodities. Various commodities and their derivatives are traded here. Most of the world's commodity markets trade in agricultural products and crude oil, silver, gold, etc., while currency trading is driven by foreign exchange markets.