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

A manufacturer for heavy mechanical equipments expects to renovate 5,000 units next year. Yet it is unlikely that a sufficient number of replacements being available, since the number of units being produced at the company have been consistently decreasing over the past five years.

The argument above assumes that

  1. Company production provides for a significant portion of the replacements used by the manufacturer to renovate heavy mechanical equipments.

  2. During the next two years company's production will increase.

  3. In the coming year, no more than 2,500 people will try to purchase renovated units from the manufacturer.

  4. In the previous year, the manufacturer's prediction as to the number of renovated units needed was inaccurate.

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

If a significant portion of the replacements did not come from production, then there would be no reason to believe that a lack of production would pose a problem.

Multiple choice

The process of eliminating unnecessary controls and restrictions on the smooth functioning of a business enterprise is known as

  1. liberalisation

  2. globalisation

  3. privatisation

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

Liberalisation refers to the process of eliminating unnecessary controls and restrictions on the smooth functioning of business enterprises. Privatisation means transfer of ownership and/or management of an enterprise from the public sector to the private sector. Globalisation may be defined as “the growing economic interdependence of countries worldwide through increasing volume and variety of cross border transactions in goods and services and of international capital flows and also, through the more rapid and widespread diffusion of technology”. 

Multiple choice

10kg of manganese is required to manufacture ____of steel.

  1. 1 tonne

  2. 50 kg

  3. 2 tonne

  4. 75 kg
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

This appears to be a metallurgy question about manganese content in steel production. 10 kg per tonne represents a 1% manganese content, which is plausible for certain steel grades. However, this ratio can vary significantly depending on the specific steel alloy being produced.

Multiple choice

Directions: Choose the best option and fill in the blank.

At the beginning of economic growth, there are changes ________, in the work that they perform and in the manner in which they live.

  1. in what people consume

  2. in the pattern of what people consume

  3. in people's consumption pattern

  4. in the consumption pattern of people

  5. in the pattern of consumption of people
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

'In the pattern...in the work...in the manner'.

Multiple choice

Directions: Choose the appropriate meaning of the word in bold.

The revenue from sales of cycles in international market remained unaltered for almost three successive years.

  1. unchanged

  2. fluctuating

  3. increasing

  4. decreasing

Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Unaltered means unchanged or unmodified. The sentence states revenue remained constant over three years, so unchanged is the precise meaning. Fluctuating means changing up and down, while increasing or decreasing suggest directional movement.

Multiple choice

Directions: Choose the best out of the available options to fill the blank against the question.

At the beginning of economic growth, there are changes ________, in the work that they perform and in the manner in which they live.

  1. in what people consume

  2. in the pattern of what people consume

  3. in people’s consumption pattern

  4. in the consumption pattern of people

  5. <font face="Arial">None of these</font>
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The sentence lists three parallel changes in a specific structure: 'in what people consume', 'in the work that they perform', and 'in the manner in which they live'. Option B 'in the pattern of what people consume' fits this pattern perfectly and is idiomatic. Other options are either grammatically awkward or don't fit the parallel structure.

Multiple choice

The marginal product of a variable input is best described as

  1. the total product divided by the number of units of variable input

  2. the additional output resulting from one unit increase in the variable input

  3. the additional output resulting from one unit increase in both the variable and fixed inputs

  4. the ratio of the amount of the variable input that is being used to the amount of the fixed input

Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Marginal product measures the extra output gained from adding one more unit of a variable input (like labor), while keeping other inputs fixed. Option B correctly captures this definition as the incremental output from the additional input unit. Option A describes average product (total output divided by total input), not marginal. Option C is incorrect because fixed inputs don't change in the marginal product calculation. Option D describes input ratio, not output change.

Multiple choice

Capital intensive technique would get chosen in a

  1. labour surplus economy

  2. capital surplus economy

  3. developed economy

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

Capital-intensive techniques require more capital relative to labour. They are chosen when capital is abundant and relatively cheaper than labour - that is, in a capital surplus economy. In labour surplus economies, labour-intensive techniques are more appropriate because labour is the relatively cheaper factor.

Multiple choice

If as a result of 50 percent increase in all inputs, the output rises by 75 per cent, this is a case of

  1. increasing returns to a factor

  2. increasing returns to scale

  3. constant returns to a factor

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

When ALL inputs increase by 50% and output increases by 75%, this is increasing returns to scale. Returns to scale refer to output response when ALL inputs are changed proportionally (long-run phenomenon). Returns to a factor refers to changing only one input while holding others constant (short-run). Since all inputs changed, this is returns to scale, and since output increased more than inputs, returns are increasing.