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 production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

The Cobb-douglas production function $Q= K^{1/2} L^{1/3}$ exhibits __________. 

  1. constant returns to scale

  2. increasing returns to scale

  3. decreasing returns to scale

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

The terms in the equation are raised to coefficients less than 1, this implies for every one unit increase in input the output will increase by less than 1. Thus, this is is a function exhibiting deceasing returns to scale. 

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

In the standard notation of Cobb Douglas Function, if + = 1,  the production function exhibits _____.

  1. constant returns to scale

  2. increasing returns to scale

  3. decreasing returns to scale

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

In a Cobb-Douglas production function Q = A * L^a * K^b, the sum of the exponents (a + b) determines the returns to scale. If a + b = 1, the function exhibits constant returns to scale.

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

In the standard notation of Cobb Douglas Function, if the terms are raised to coefficients greater than 1, then the production function exhibits _______.

  1. CRS

  2. DRS

  3. IRS

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

In the standard notation of Cobb Douglas Function, if the terms are raised to numbers greater than 1 then for each one unit increase in input the output will increase by more than 1. eg: $Q(K,L)$ = ${K^3}$${L^6}$ 


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

Law of variable proportion applies _______.

  1. in the long run

  2. in the short period

  3. on the very long period

  4. all of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
It is only possible for the law of variable proportions to operate under specific conditions. 
1. The state of technology is given and remains unchanged
2. It is assumed that some inputs are fixed while others are varied. As it is only then that the factor proportions can be changed. 
3. It is assumed that technology is such that it is possible to change the factor proportions. The law will not apply in situations where the factors of production must be used in fixed proportions. 
4. It is assumed that all the units of the variable factor are homogeneous and are equally efficient. (eg every worker hired is equally efficient).
Multiple choice economics production and costs return to scale and cobb douglas function total product, average product and marginal product laws of returns - returns to a factor and returns to scale

Law of increasing returns states that _______.

  1. proportionate increase in production is more than the proportionate increase in inputs

  2. additional unit of variable input causes increase in total production

  3. additional unit of fixed input causes increase in production at increased rate

  4. additional unit of total input cause increases in total output at increased rate
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation
Increasing returns to scale: If increase in output is more than proportionate to an increase in quantity of all inputs, returns to scale are said to be increasing. The terms in the standard Cobb-Douglas function are raised to coefficients greater than 1.

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

In case of Cobb -Douglas Production function the IQ curve is generally_____________.

  1. Convex

  2. Concave

  3. Parallel to x axis

  4. Parallel to y axis
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The Cobb-Douglas production function exhibits diminishing marginal rates of technical substitution, which results in isoquants (IQ curves) that are convex to the origin. This shape reflects the principle that as more of one input is used, it becomes progressively less effective at substituting for the other input.

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

In the production equation Qx = f(L,K,T...n), L is _______________.

  1. Labour

  2. Level of technology

  3. Loyalty

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

In standard production function notation, Q represents output, f represents the functional relationship, and the variables inside the parentheses represent inputs. L is the standard abbreviation for Labor, while K typically denotes Capital.

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

Returns to scale have been classified as constant, increasing and decreasing depending upon the __________________.

  1. inputs required to produce a given level of output

  2. amount of output produced out of a given amount of inputs

  3. response of output to a change in scale

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

Returns to scale describe how output changes when all inputs are increased by the same proportion. This encompasses the relationship between input scaling and output response, making all the listed factors relevant to the classification.

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

In electricity generation plants, when the plant grows too large risks of plant failure with regard to output increase disproportionately. Hence we are talking about which concept of returns to scale?

  1. Constant Returns to Scale

  2. Increasing Returns to Scale

  3. Decreasing Returns to Scale

  4. Balanced Returns to Scale
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Decreasing returns to scale occur when a proportional increase in all inputs leads to a less than proportional increase in output. In large-scale operations like power plants, inefficiencies or management difficulties can lead to this outcome.

Multiple choice our life and environment geography

'ECOMARK' a symbol is related to ___________.

  1. agricultural goods

  2. manufacturing goods

  3. goods of best quality

  4. goods safe for environment
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The ECOMARK label is a certification mark issued by the Bureau of Indian Standards to products that conform to specific environmental criteria.

Multiple choice our life and environment geography

Cement manufacturing is one of the largest _________ commodity industry.

  1. Mineral

  2. Essential

  3. Consumer

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

Cement is a mineral-based commodity produced through the processing of limestone and other minerals.

Multiple choice economics basic concepts of national income macroeconomic theories some basic concepts of macroeconomics introduction to macroeconomics

Which of the following is not an example of flow variable?

  1. Number of births during a year

  2. National wealth

  3. National income

  4. Wheat produced during a year
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

National wealth is not an example of flow variable. It is a stock since it is measured at a point of time. National wealth is not time dimensional. It is not measured over a specified period of time like flow. Therefore, national wealth is a stock concept.

Multiple choice economics basic concepts of national income macroeconomic theories some basic concepts of macroeconomics introduction to macroeconomics

Final goods refer to those goods which are used either for ______ or for ________.

  1. Consumption, investment

  2. Consumption, resale

  3. Resale, investment

  4. Resale, further production
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Final goods refer to those goods which are used either for consumption or for investment. Final goods have crossed the boundary of production and are ready for use by their final users. These goods are included in the estimation of national product or national income. Example: Bread and butter used by the consumers.

Multiple choice economics basic concepts of national income macroeconomic theories some basic concepts of macroeconomics introduction to macroeconomics

Which of the following is an example of an intermediate goods? 

  1. Car sold by a dealer of second hand cars

  2. Steel and cement used to construct a flyover

  3. Fertilizers purchased by a farmer

  4. All the these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation
All of the following are examples of an intermediate good:
a) Car sold by a dealer of second hand cars: It is an intermediate good since cars are purchased by a dealer as goods for resale.
b) Steel and cement used to construct a flyover: It is an intermediate good since steel and cement are used as a raw material.
c) Fertilizers purchased by a farmer: It is an intermediate good since fertilizers is used as a raw material in agriculture.