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 basic concepts of national income macroeconomic theories some basic concepts of macroeconomics introduction to macroeconomics

Sugar purchased by a Sweet shop is an ______ good, while it is a _______ good when it is purchased by a consumer. 

  1. capital, final

  2. final, intermediate

  3. intermediate, final

  4. final, producer
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Sugar purchased by a Sweet shop is an intermediate good, while it is a final good when it is purchased by a consumer as sugar purchased by a sweet shop is used as a raw material and goods used for raw material are classified as intermediate goods as value is yet to be added, while, sugar purchased by a consumer is a final good as it is directly consumed and no value is yet to be added.

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

Are the following statements true or false? Give reasons.
Increase in stock of goods held by a consumer will contribute to capital formation. 

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Capital formation refers to the net addition to the stock of capital goods (like machinery, factories, or infrastructure). Goods held by a consumer for personal use are consumption goods, not capital goods, so they do not contribute to capital formation.

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

Capital output ratio refers to __________________.

  1. units of capital required to produce consumer goods

  2. units of capital required to produce output

  3. amount of capital required to instal a capital asset

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

A frequently used tool that explains the relationship between the level of investment made in the economy and the consequent increase in GDP is the capital-output ratio. The concept of the capital-output ratio expresses the relationship between the value of capital invested and the value of output.

Capital output ratio is the amount of capital needed to produce one unit of output. For example, suppose that investment in an economy, investment is 32% (of GDP), and the economic growth corresponding to this level of investment is 8%.

Here, a Rs 32 investment produces an output of Rs 8. Capital output ratio is 32/8 or 4. In other words, to produce one unit of output, 4 unit of capital is needed. But don’t forget that the Rs 32 invested in the form of machinery will remain there for around ten or twelve years. Such machinery will be giving Rs 1 output in every year.

Hence, B is the correct option.

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. A Tata Indica sold by a dealer of second hand cars

  2. Steel and cement used to construct a flyover

  3. Farming crop purchased by FCI

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

Intermediate goods are used as inputs in the production of other goods. Steel and cement used in construction are inputs for the final structure (the flyover).

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

The value of plant and machinery used and worn out in the manufacturing of goods and services is known as _______.

  1. transfer payment

  2. intermediate goods

  3. depreciation

  4. gross block
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Depreciation refers to the loss in value of fixed capital assets due to wear and tear, obsolescence, or passage of time during the production process.

Multiple choice commercial studies marketing and sales difference between products and services product marketing

The Cobb-Douglass Production Function is often used as ____________.

  1. Q = A K a L b

  2. Q = A K a L 1 - b

  3. log Q = a log k = log c

  4. Q = A b a - L a
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The standard Cobb-Douglas production function is expressed as Q = A * K^a * L^b, where Q is total production, A is total factor productivity, K is capital, L is labor, and a and b are output elasticities of capital and labor respectively.

Multiple choice commercial studies marketing and sales difference between products and services product marketing

__________ can reduce the quantity of defects product.

  1. Profit

  2. Cost or production

  3. Cost of sales

  4. Quality of product
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Quality management processes and standards are directly responsible for identifying and reducing defects in products. Profit, cost of production, and cost of sales are financial metrics that result from operations rather than being the direct mechanism for reducing physical defects.

Multiple choice commercial studies marketing and sales difference between products and services product marketing

In case of_________ layout, production is carried on in special purpose machine.

  1. functional

  2. product

  3. stationary

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

In a product layout (also known as line layout), machines are arranged in the sequence of operations required to manufacture the product. This often involves specialized, single-purpose machines dedicated to a specific step in the production line.

Multiple choice commercial studies marketing and sales difference between products and services product marketing

Which of the following is an active factor of production?

  1. Land

  2. Labour

  3. Capital

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

The factors of production include land, labour, capital and entrepreneurship.

Other factors like land, capital are passive and but labor is an active factor. 
Land and labour are two essential factors of production. Since the real work of production is done by labour it is considered as the active factor of production.

Multiple choice commercial studies marketing and sales difference between products and services product marketing

If all the products sold are closely related in their usage or production etc. the mix can be called as _______.

  1. Consistent

  2. Depth

  3. Breadth

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

Consistency in a product mix refers to how closely related the various product lines are in terms of end use, production requirements, distribution channels, or other ways. This ensures the company maintains a focused brand identity.

Multiple choice commercial studies marketing and sales difference between products and services product marketing

The process of withdrawal is technically known as___________.

  1. Product modification

  2. Product elimination

  3. Product line expansion

  4. Product line modification
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Product elimination is the formal process of removing a product from the company's product mix, often due to poor performance or strategic shifts. It is the final stage in the product life cycle management.

Multiple choice commercial studies marketing and sales difference between products and services product marketing

Fixing a standard for product is a.

  1. Managerial function

  2. Social function

  3. Technical function

  4. Economic function
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Setting product standards involves defining technical specifications, quality benchmarks, and performance metrics. This is a technical function because it relies on engineering and production requirements.