Economics · General Awareness

Economic Principles

1,087 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 solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Factor income reflects the value of the resources provided by the factor of production.

  1. True

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

In price mechanism, factor income directs the flow of factors of production in the market as if the income rises, the supply of the factors increases and if the income decreases, the supply of the factors decreases.

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Factors of production are paid according to their contribution to the output sold.

  1. True

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

Factor of production contributes to the production of output and not to the marketing or selling of output. Therefore they are paid according to the number of units of output produced and not according to how many output sold. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Producer will adopt capital-intensive technique of production when the price capital is relatively cheaper than the price of labour.

  1. True

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

The central problem of "How to produce?" which is faced by the economy where the economy consider either labour intensive techniques or capital intensive techniques for the production of goods and services in the economy depending upon the available resources in the economy. Therefore, a producer will go with the technique which is cheapest among all the techniques of the production. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

The problem of ___________ is solved under price mechanism by the determination of techniques or methods of production.

  1. what to produce

  2. how to produce

  3. for whom to produce

  4. how much to produce
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The central problem of "How to produce?" which is faced by the economy where the economy consider either labour intensive techniques or capital intensive techniques for the production of goods and services in the economy depending upon the available resources in the economy is easily solved in a price mechanism economy as resources are utilized here depending upon the demand and supply of commodities in the market. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

When labour is relatively cheaper than capital, the producer will adopt ___________ technique of production.

  1. capital-intensive

  2. labour-intensive

  3. land-intensive

  4. either A or C
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
The central problem of "How to produce?" which is faced by the economy where the economy consider either labour intensive techniques or capital intensive techniques for the production of goods and services in the economy depending upon the available resources in the economy. Therefore, a producer will go with the technique which is cheapest among all the techniques of the production.
Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

If resources are abundant, then opportunity costs will be _________.

  1. infinity

  2. increasing trend

  3. decreasing trend

  4. zero
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

If resources are abundant then while producing extra unit of a commodity the producer does not has to shift resources from production of another commodity and there will be no decrease in the production of another commodity. So the opportunity cost will remain the zero in this case. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

Law of Variable Proportions is applicable to ________.

  1. Medium-run

  2. Short-run

  3. Long-run

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

Law of Variable Proportions is applicable to - short rum. Law of variable proportion exhibits the relationship between the change of output in respect to the change in only one variable factor, only in short run economy. It involves three phases of production, namely, increasing returns, diminishing returns and negative returns.

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

The planning authority decides 'what to produce' based on which of the following?

  1. Needs of the people

  2. National priorities

  3. Both A & B

  4. Neither A nor B
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

In a socialist economy, the central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided keeping in mind the needs of the people i.e. consumer goods and national priorities i.e. capital goods. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

The planning authority allocates resources to the production of those commodities which people want.

  1. True

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

The central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'What to produce? Consumer goods or capital goods?' which is decided by allocating resources for the production keeping in mind the needs of the people i.e. consumer goods and to satisfy their wants. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

The planning authority is expected to choose a production technique that ensures that the available resources are _____________.

  1. fully utilised

  2. under utilised

  3. over utilised

  4. either B or C
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The central problems of the economy is solved by a centrally based planning authority that resolves all the centrally based problems related to production of goods and services in the economy which includes the problem of 'How to produce? Using labour or capital intensive techniques?' which is decided by allocating resources for the production keeping in mind the most efficient technique that will maximize the output of the economy. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

The government in a mixed economy controls production in _________  as well as _________ sector so as to ensure adequate availability of necessities.

  1. primary, industrial

  2. public, private

  3. banking, agricultural

  4. public, construction
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

In a mixed economy both private as well as public enterprises utilize the resources for the production of goods and services in  the economy for personal as well as social gains where government audits the overall production to ensure adequate availability of goods and services in the economy. 

Multiple choice economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

The ___________ sector in a mixed economy decides 'what to produce and how much to produce' based on the overall national objectives.

  1. private

  2. public

  3. industrial

  4. agricultural
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation
In a mixed economy, public sector resolves the problems of 'what to produce and how to produce?' keeping in mind the social welfare of the economy which includes overall economic growth and development, less input and factor prices for the availability of resources and generation of employment opportunities to eradicate poverty from the economy. 
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Increase in supply or productivity of factors such as financial, labour and material is called _________.

  1. resource innovations

  2. expansion

  3. factor innovations

  4. innovations planning
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

Factor Innovations means procurement of capital, labour and old material from new source or new type.

Multiple choice business economics and quantitative methods introduction to micro economics microeconomics and macroeconomics : introduction economic ideas of j k mehta micro and macro economics

If there is an increase in income levels, the ______________ increases.

  1. Propensity to consume

  2. Propensity to save

  3. Both (a) and (b)

  4. Neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

As income levels rise, individuals have more disposable income, which leads to an increase in both consumption and savings. Therefore, the propensity to save increases as income increases.