Economics · General Awareness

Economics Concepts and Theories

1,710 Questions

Review fundamental and advanced economics concepts through this structured question bank. The topics include macroeconomics, fiscal policy, international trade theories, and economic regulation. These questions are ideal for candidates preparing for civil services and other administrative competitive examinations.

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Economics Concepts and Theories 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

Free operation of price mechanism leads to inequalities in the distribution of income and wealth.

  1. True

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

Producers produce goods and service for them who have large money power. Thus, the price mechanism cannot ensure social justice rather it widens inequality in the distribution of income and wealth the rich get richer and the poor poorer. 

Price solves the problem of what to produce and in what quantities. There are unlimited wants but there is a scarcity of productive resources. If the price is high the producers will be willing to supply more but the consumers will be buying less and vice versa.

The correct answer is A.

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

Price mechanism still operates freely, without government intervention, in certain capitalist economies.

  1. True

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

Capitalist economies has private ownership where utilization of resources takes place for private gains, therefore here price mechanism takes place very smoothly without any government intervention in all types of private business that operates in a capitalist 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

Which of the following is correct?

  1. Normative economics is not concerned with value judgement.

  2. A market is a process that reconciles consumer decision, production decisions and labour decisions.

  3. A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy.

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

a) A market is a process that reconciles consumer decision, production decisions and labour decisions.
b) A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy.
Both these above statements are correct. 
Market equilibrium is determined by the consumer decision, production decision and labour decisions.
In a mixed economy, decisions are taken by both the private as well as public sectors of 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
When some resources are shifted from Use-$1$ to Use-$2$ (given technology and resources), the marginal rate of transformation _____________, as per the concept of PPC.

  1. increases

  2. decreases

  3. remains constant

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

When some resources are shifted from Use-1 to Use-2( given technology and resources) the marginal rate of transformation increases, as per the concept of Production possibility curve.Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost or marginal rate of transformation.  

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

In a market economy the consumers enjoy the freedom of choice between ____________.

  1. consumption and savings

  2. consumption and investment

  3. savings and investment

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

In a market economy, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads distribution of goods and services according to the purchasing power of an individual where the consumers have freedom of choice between how much they will spend and how much they will save. 

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

Which of the following non-economic conditions serve as a pre-requisite for the operating of price mechanism in an economy?

  1. Developed legal system

  2. Social chaos

  3. Government intervention

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Since price mechanism operates without government intervention, there is need for developed legal system in the economy so that there are less chances of fraudulent practices 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

Price mechanism is the instrument for determining the level of _________.

  1. production and consumption

  2. savings and investment

  3. technological development

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

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Therefore, it determines the overall production in the economy that also signifies technological development and investment done. Moreover, it determines the consumption expenditure in the economy through aggregate demand which also signifies the overall savings 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

In a socialist economy, the central planning authority takes decisions to solve which of the following problems of the economy?

  1. What to produce

  2. How to produce

  3. For whom to produce

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

  • What to produce? Consumer goods or capital goods?
  • How to produce? Using labour or capital?
  • For whom to produce? Rich people or poor people?

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

Under a socialist economy framework, it is the responsibility of the central bank of the country to ensure that adequate amount of goods are made available to the people.

  1. True

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

In a socialist economy, the central problems of the economy is solved by a centrally based planning authority which is the government 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 economic problems in a mixed economy are solved with the use of ____________.

  1. price mechanims

  2. economic planning

  3. both A & B

  4. neither A nor B
Reveal answer Fill a bubble to check yourself
C 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. Therefore, the private sector generates price mechanism in the economy to solve to the centrally based economic problems whereas the public sector depends upon an efficient economic plan to be executed to eradicate these problems. 
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

_______________ price mechanism operates in a socialist economy.

  1. Administered

  2. Open

  3. Free

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

In a socialist economy, the price mechanism i.e. price affects the demand and supply of the commodities is directed by a centrally based planning authority that controls the price mechanism to certain limits and regulates it to protect civilians from fraudulent practices.

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 decision regarding distribution of income is taken by the planning authority in a capitalist economy.

  1. True

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

Capitalist economies has private ownership where utilization of resources takes place for private gains, therefore here decision regarding the distribution of income and wealth is taken on the basis of the purchasing power of an individual where the private investors gain the maximum. 

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

Under mixed economy framework, free markets and price mechanism operate under the control and regulation of the government.

  1. True

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

In a mixed economy, private decisions are intervened by the government due to which there is problem in price mechanism where prices of a commodities are determined by the forces of demand which involves consumers and supply which involves producers and labours with exception set by government on some basic commodities. 

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 basic economic problems are solved in the public sector of a mixed economy through decision making by the planning authority.

  1. True

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

In a mixed economy, the public sector price mechanism i.e. price affects the demand and supply of the commodities is directed by a centrally based planning authority that controls the price mechanism to certain limits and regulates it to protect civilians from fraudulent practices.

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

In the private sector of a mixed economy, ____________ plays an important role in solving the basic economic problems.

  1. price mechanism

  2. planning authority

  3. government

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

In a private sector of a mixed economy, price mechanism takes a very prominent role as in such sectors price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and purchase by the demand sector i.e demand will increase if price decreases and vice-versa.