introduction to micro economics section 1 Practice Questions Answers Test with Solutions & More Shortcuts

Question : 1 [SSC CML 2001]

Who is called the Father of Economics?

a) Adam Smith

b) J.M. Keynes

c) Malthus

d) Ricardo

Answer: (a)

Adam Smith is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776).

The latter, usually abbreviated as The Wealth of Nations, is considered his magnum opus and the first modern work of economics. Smith is cited as the father of modern economics and is still among the most influential thinkers in the field of economics today.

Question : 2 [SSC CHSL 2015]

A demand curve will not shift:

a) When only price of the commodity changes

b) When only income changes

c) When only prices of substitute products change

d) When there is a change in advertisement expenditure

Answer: (a)

In economics, the demand curve is the graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price. A change in the price of the commodity leads to a movement along the demand curve without shifting it.

In simple words, the increase or decrease in the price of a commodity only causes contraction or extension of demand (increase causes contraction while decrease cause extension).

An increase or decrease in demand only occurs only when there is a change in other determinants of demand, other than the price of the commodity.

So when the price of the commodity changes, the demand curve does not shift; however, when any other determinant of demand changes, the demand curve shifts either rightward or leftward.

Question : 3 [SSC CHSL 2014]

Which of the following is not an economic problem ?

a) Deciding between different ways of spending leisure time

b) Deciding between paid work and leisure

c) Deciding between expenditure on one good and the other

d) Deciding between alternative methods of personal savings

Answer: (a)

The Theory of Economic Problem states that scarcity exists in the sense that only finite and insufficient resources are available to satisfy the needs and desires of all human beings.

The fundamental economic problem is how to allocate scarce resources to the provision of various goods and services within the economy.

The question then becomes how to determine what is to be produced, and how the factors of production (such as capital and labour) are to be allocated.

Question : 4 [SSC CGL 2011]

The ‘break-even point' is where

a) total revenue equals total cost

b) marginal revenue equals marginal cost

c) average revenue equals average cost

d)   None of the above

Answer: (a)

Break-even is the point of balance between making either a profit or a loss. In economics & business, specifically cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has “broken even”.

A profit or a loss has not been made, although opportunity costs have been “paid”, and capital has received the risk-adjusted, expected return.

Question : 5 [SSC CGL 2015]

‘Capital gains’ refers to goods which

a) find multiple uses

b) serve as a source of raising further capital

c) help in the further production of goods

d) directly go into the satisfaction of human wants

Answer: (c)

Capital goods are goods that are used in producing other goods, rather than being bought by consumers.

They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.

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