Economics (Part – III)

Total Questions: 50

31. Which of the following statements deals with microeconomics? [S.S.C. Online CHSL (T-I) 27.01.2017(Shift-III)]

(a) Government spending will decrease unemployment
(b) Increase in money supply will increase inflation
(c) Lower interest rates will increase investment
(d) Higher fees at private schools will increase admissions at public schools

Correct Answer: (d) Higher fees at private schools will increase admissions at public schools

Solution:Microeconomics is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. Higher fees at private schools will affect the decision making of an individual and admissions to public schools will increase because of relatively lower fees.

32. Founded in the year 1886 by a pharmacist named John Pemberton, this product is the second most widely understood term in the world after "OK". What is its name? [C.P.O. S.1. 11.06.2016 (Shift-I)]

(a) Aspirin
(b) ENO
(c) Coca-Cola
(d) Pepsi

Correct Answer: (c) Coca-Cola

Solution:Coca-Cola is the second most widely understood term in the world after "Ok". It was originally intended as a patent medicine when it was invented in the late 19th century by John Pemberton. Coca Cola is the world's largest soft drinks company. It is rated as the most recognized trademark and the third most valuable brand in the world.

33. Which of the following is not a feature of a cap-italist economy? [S.S.C. Online C.G.L.(T-I) 1.09.2016 (Shift-III)]

(a) Right to private property
(b) Existence of competition
(c) Service motive
(d) Freedom of choice to consumers

Correct Answer: (c) Service motive

Solution:Capitalism has many unique features, some of which include a two-class system, private ownership, freedom of choice, a profit motive, minimal government intervention, and competition. Service motive is Not a feature of the Capitalist economy.

34. A 'Market Economy' is one which- [S.S.C. Online C.G.L. (T-I) 9.09.2016 (Shift-II)]

(a) is controlled by the Government
(b) is free from the Government control
(c) is influenced by international market forces
(d) All of these

Correct Answer: (b) is free from the Government control

Solution:A 'Market Economy' is one which is free from Government control. Market economies rely on the interplay between supply and demand to function. "Demand" refers to the number of goods and services people need or want.

35. In which economic system the government decides what goods are to be produced in accordance with the needs of society? [S.S.C. Online C.P.O.S.I. (T-I) 7.07.2017 (Shift-I)]

(a) Socialist
(b) Mixed
(c) Capitalist
(d) Traditional

Correct Answer: (a) Socialist

Solution:The planned economy in India was based on the socialist system. Although the Indian economy is a mixed economy, there is neither a fully capitalist economy nor a fully socialist economy. In a socialist economic system, there is social ownership of the means of production rather than individual ownership. At the same time, these means of production are not used for any individual interest, but for social and collective interests. Apart from this, equitable distribution of production and national income is done in the socialist economic system, so that human beings do not do human exploitation. In a socialist economic system, the government decides to produce different goods according to the needs of the society. According to Schumpeter, a "Socialist economy is an economy in which the means of production are controlled by the central power, where the economic activities of the society take place in the public sector rather than in the private sector".

36. Planned economy in India is based on which system? [S.S.C. Online C.P.O.S.I. (T-I) 2.07.2017 (Shift-I)]

(a) Capitalist system
(b) Traditional system
(c) Command system
(d) Socialist system

Correct Answer: (d) Socialist system

Solution:Planned economy in India is based on socialist system. Planned economy of India can be characterized by social ownership and democratic control of the means of production, direct public ownership etc., which are the attributes of socialist economy.

37. When the demand for a goods increases with an increase in income, such a goods is called_______. [S.S.C. Online C.G.L.(T-I) 2.09.2016 (Shift-III)]

(a) Superior goods
(b) Giffen goods
(c) Inferior goods
(d) Normal goods

Correct Answer: (a) Superior goods

Solution:Such goods whose demand increases with the increase in income is called Superior Goods.

38. If cash reserve ratio decreases, credit creation will_______. [S.S.C. Online CHSL (T-I) 9.01.2017(Shift-III)]

(a) increase
(b) decrease
(c) does not change
(d) first decreases then increases

Correct Answer: (a) increase

Solution:If the cash reserve ratio decreases, credit creation will increase. CRR refers to the amount of money banks have to keep with the central bank. So, when the amount required under CRR is reduced, banks have more money at their disposal, which is then used for credit creation in the economy.

39. If the selling price of a product under perfect competition is Rs 25, what will be the marginal revenue? [C.P.O. S.I. 5.06.2016 (Shift-I)]

(a) zero
(b) equal to Rs.25
(c) more than Rs.25
(d) less than Rs.25

Correct Answer: (b) equal to Rs.25

Solution:Under perfect competition MR = Me and AR = AC, that is, in perfect competition MR = MC = AR = AC. Here ARP is the price.

40. What is marginal revenue? [C.P.O. S.I. 5.06.2016 (Shift-I)]

(a) Revenue received on sale of additional units
(b) Revenue from the sale of all units
(c) Average revenue of a firm
(d) Revenue received on each unit sold

Correct Answer: (a) Revenue received on sale of additional units

Solution:Marginal revenue (MR) is the increase in revenue that results from the sale of one additional unit of output. While marginal revenue can remain constant over a certain level of output, it follows from the law of diminishing returns and will eventually slow down as the output level increases.

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