Economics · General Awareness

Economic Principles

1,097 Questions

Economic principles form the foundation of how societies allocate resources and produce goods. This topic covers factors of production, types of capital, and demand classifications. It is a vital component of the economics syllabus in many civil services and banking exams.

Factors of productionCapital typesDemand classificationsEconomic activities

Economic Principles Questions

Multiple choice economics agriculture sector profile of indian agriculture and agricultural marketing role of agriculture sector foreign trade in india

As the economy grew, the share of agricultural exports in total exports _______.

  1. increased

  2. come down

  3. has remained constant

  4. no specific trend
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

With economic growth, the composition of exports shifts away from primary agricultural products toward manufactured goods and services. Consequently, the relative share of agricultural exports in total exports tends to decrease.

Multiple choice economics agriculture sector profile of indian agriculture and agricultural marketing role of agriculture sector foreign trade in india

Beyond certain limits, the demand for agri-cultural products _______ and demand for industrial output ________.

  1. falls, rises

  2. rises, falls

  3. rises, rises

  4. falls, falls
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Engel's Law suggests that as income rises, the proportion of income spent on food (agricultural products) falls, while demand for industrial goods and services rises.

Multiple choice economics agriculture sector profile of indian agriculture and agricultural marketing role of agriculture sector foreign trade in india

Increase in capital goods industries in an economy results in ___________ cost output.

  1. high

  2. low

  3. moderate

  4. constant
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Capital goods industries require large initial investments, leading to a high capital-output ratio, but they help lower the cost of production for other sectors in the long run.

Multiple choice economics agriculture sector profile of indian agriculture and agricultural marketing role of agriculture sector foreign trade in india

Consumer goods means _______.

  1. minerals, fertilizers, cement, steel etc.

  2. machinery, machine tools etc.

  3. chemicals, rubber, plastic, coal etc.

  4. man-made fibers, beverages, watches etc.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Consumer goods are products intended for final consumption by individuals, such as beverages, watches, and clothing, as opposed to capital goods used for production.

Multiple choice economics agriculture sector profile of indian agriculture and agricultural marketing role of agriculture sector foreign trade in india

Capital output ratio is low in ___________.

  1. agriculture sector

  2. capital goods sector

  3. consumable goods sector

  4. none of the above
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital output ratio is low in agricultural sector. Capital output ratio of agricultural sector implies the agricultural output in terms of the capital invested in the sector. It is quite low in the primary sector of the economy because many people are employed in this sector and the marginal output will increase if some people step back from getting employed in the agricultural sector.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

Capacity ratio is equal to ________________________.

  1. $\dfrac {\text {Standard hours for actual production}}{\text {Budgeted hours}}\times 100$
  2. $\dfrac {\text {Actual hours worked}}{\text {Budgeted hours}}\times 100$
  3. $\dfrac {\text {Standard hours for actual production}}{\text {Actual hours worked}}$

  4. None of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The capacity utilisation ratio measures whether the total direct labour hours worked in a production cost centre in a period was greater or less than what was budgeted. It is calculated as: (Actual direct labour hours worked ÷ budgeted direct labour hours) × 100%.

Multiple choice commercial studies budgeting meaning, comparison, types, utility and limitations of budgets public finance, budget and fiscal policy public expenditure and public revenue

Zero base budgeting was first used by ____________________.

  1. U.S. Department of Agriculture

  2. U.K. Department of Agriculture

  3. U.K. Department of Industry

  4. Indian Department of Agriculture
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Zero-based budgeting concept was advocated in 1924 by British budget authority Edward Hilton Young. He advocated complete justification of every item requested in a budget. The ZBB concept became more popular only in 1970s. In 1960s, ZBB was formally initiated in the Department of Agriculture of the USA.

Multiple choice geography ideas of development study of population in tamil nadu population and migration human geography in tamil nadu

Scarcity of capital, technological backwardness and unemployment are generally found in ___________.

  1. developed countries

  2. underdeveloped countries

  3. developing

  4. none
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

  • The underdeveloped countries are characterized by:
  1.  Low per capita income 
  2.  High rate of capital formation 
  3.  High dependency figure 
  4.  Working force largely in the primary sector 

Multiple choice elements of accounts ratio analysis activity (or turnover) ratios accounting ratio's accounting ratios

The turnover ratio indicates ________.

  1. the number of times the capital has been rotated in the process of doing business

  2. the efficiency with which the capital employed is rotated in the business

  3. Both (A) and (B)

  4. Financial position of the company
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Turnover ratio is a measurement of the number of times a company's inventory is replaced during a given period of time. It is calculated by dividing cost of goods sold by average inventory during a given period of time. It indicates the number of times the capital has been rotated in the process of doing business as well as the efficiency with which the capital employed is totated in the business.

Multiple choice elements of accounts ratio analysis activity (or turnover) ratios accounting ratio's accounting ratios

Capacity ratio  X  Efficiency ratio =                             .

  1. Activity Ratio

  2. Capacity Ratio

  3. Efficiency Ratio

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capacity ratio X Efficiency ratio = Activity ratio

If Capacity ratio = $90\%$ , Efficiency ratio = $85\%$ , then
Activity ratio = $90/100$ x $85/100$
                      = $76.5\%$

Multiple choice economics laws of returns - returns to a factor and returns to scale total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function

In which stage of production are the Average Product and Marginal Product decreasing with the Marginal Product above zero (positive)?

  1. In the stage of Constant Returns

  2. In the stage of Decreasing Returns

  3. In the stage of Increasing Returns

  4. Both (a) and (c)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In the stage of diminishing returns, both Average Product and Marginal Product are declining, but Marginal Product remains positive until it hits zero at the end of the stage.

Multiple choice economics laws of returns - returns to a factor and returns to scale total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function

If Stage I = Increasing Returns, Stage II = Diminishing Returns, and Stage III = Negative Marginal Returns, answer the questions:
A Rational Producer will not operate in Stage I due to the reason that -

  1. There is more scope for making the best use of the Fixed Factor

  2. Total Output still shows an increasing trend

  3. Optimal Combination of Fixed and Variable Factors is not yet achieved

  4. All of the above
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

In Stage I, the fixed factor is underutilized, and increasing the variable factor improves efficiency, meaning the producer has not yet reached the optimal combination.

Multiple choice economics laws of returns - returns to a factor and returns to scale total product, average product and marginal product production and law of variable proportions production return to scale and cobb douglas function

A Rational Producer intends to work in-

  1. Stage of Constant Returns

  2. Stage of Increasing Returns

  3. Stage of Diminishing Returns

  4. Stage of Negative Returns
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

A rational producer avoids Stage 1 (underutilization) and Stage 3 (negative marginal returns), choosing to operate in Stage 2, which is the stage of diminishing returns.