1 Marshall in his definition of economics uses the concept of

Material welfare

2 Wealth of Nations

Is a book

3 Alfred Marshall wrote

Principles of Economics

4 Economic Theory means

Principles of economics

5 Robbins in his definitions talks about

Scarcity of resources

6 Market system means


7 ‘Wealth of Nations’ was written in


8 Utility and usefulness are


9 Validity of economic theories can never be proved with 100% certainty because of

Ceteris Paribus clause

10 A consumer is in equilibrium when marginal utilities are


11 When marginal is negative it must be true that

The total is decreasing

12 Utility is most closely related to the term


13 The term marginal in economics means


14 Demand curve slopes downward because of

The law of Diminishing Marginal Utility

15 A consumer’s spending is restricted because of the

Budget constraint

16 Law of Substitution is another name for the law of

Equi-Marginal Utility

17 Law of Equi-Marginal Utility is a law of

Consumption of wealth

18 When Marginal Utility is positive, Total Utility


19 Diminishing Marginal Utility is the basis of

Law of Demand

20 When Marginal Utility = 0, Total Utility is



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21 Quality of a commodity that satisfy human want or need is called


22 Indifference curves are convex to the origin because

Two goods are imperfect substitute

23 A statement of how one variable affect another variable is

A functional relationship

24 If we plot the equation Y = 20 + 3x, its slope is

3 (Three)

25 Law of Demand shows relation between

Price and quantity of commodity

26 If quantity demanded is completely unresponsive to changes in price, demand is

Perfectly inelastic

27 Other things equal, if a good has more substitutes, its price elasticity of demand is


28 If elasticity of demand is very low it shows that the commodity is

A necessity

29 When demand is perfectly inelastic, an increase in price will result in

An increase in total revenue

30 If demand is unitary elastic, a 25% increase in price will result in

25% decrease in quantity demanded

31 When cross elasticity of demand is a large positive number, one can conclude that

The good is a substitute

32 If demand is inelastic, a change in the price

Will change total revenue in the same direction

33 Price and demand are positively correlated in case of

Giffen goods

34 The elasticity of demand of durable goods is

Greater than unity

35 The elasticity of demand of durable goods is

More elastic

36 When price elasticity of demand for normal goods is calculated, the value is always


37 Income elasticity f demand for normal goods is always


38 Demand is a function of


39 If price and total revenue move in the same direction, then demand is


40 Supply is an increasing function of


41 Supply curve will shift when

Technology changes

42 An increase in demand will cause supply curve to

No effect on supply

43 If price changes by 1% and supply changes by 2% then supply is


44 If elasticity of supply is greater than one then supply curve will be

Touching Y-axis

45 Supply curve is flatter in

Long run

46 When supply of a commodity increases without change in price it is called

Rise in supply

47 What best explain a shift in market supply curve to the right?

A new technique makes it cheaper to produce the good

48 A decrease in demand causes the equilibrium price to


49 When prices are below equilibrium level, there will be

Shortage of commodity in the market

50 If equilibrium price rises but equilibrium quantity remains unchanged, the cause is

Supply decreases and demand increases


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51 Equilibrium is an important idea for

Predicting economic changes

52 The three broad types of productive resources are

Capital, labour and natural resources

53 The transformation of resources into economic goods and series is called


54 Economic goods produced by firms are called


55 For production of goods we need how many factors?

4 (Four)

56 Standard of living of a country can be raised if it increases


57 Productivity of land can be increased by

Intensive cultivation

58 According to Malthus population increases by progression of kind


59 Unemployment due to mechanization of agriculture is


60 The labour force participation rate is the

Proportion of population working or looking for work

61 The set of skills that workers possess for production of goods is called

Human capital

62 To economists, investment refers to

The creation of new capital

63 A factory is an example of


64 Those who invest in joint stock companies are called


65 Limited liability is one of the advantages of

Joint Stock Company

66 A public limited company is run by

Board of directors

67 Negative return in short run imply that

Marginal is negative

68 Economies of scale suggest that

The firm’s marginal cost curve lies above its average cost curve

69 In law of diminishing return at least one factor must be


70 Economies of scale are of two kinds

Internal and external

71 A firm under perfect competition is

Price taker

72 In case of monopoly

Marginal revenue is always less than average revenue

73 Marginal revenue is always less than price at all levels of output in


74 As output increases

MC curve firstly falls and then rises

75 Unit cost is another name of

Average Total Cost

76 Marginal Cost is given by

Slope of Total Cost

77 Total Cost starts from

Does not start from origin

78 Total Variable Cost starts from


79 Total Cost

Rises continuously

80 The cost which a firm incurs for purchasing or hiring factors is called

Explicit cost

81 The Short run

Requires that at least one input is constant

82 The long run is a

Period long enough to allow firms to change plant size and capacity

83 The necessary condition for equilibrium position of a firm is


84 Profit is maximum when

Distance between TR and TC is maximum

85 Profit is maximum when

Slope of TC and TR is the same

86 Normal profit is

A part of total cost

87 Economic profit is

Total revenue minus total cost

88 A firm earns economic profit when total profit exceeds

Normal profit

89 The basic goal of a firm is to

Maximize profit

90 A firm decides to exit the industry when

Price is less than LAC

91 Profit is maximum when

TC and TR curves are parallel

92 In monopoly and perfect competition the cost curves are


93 Normal profit is called normal because

It is minimum acceptable to the producer

94 If a firm shuts down temporarily it will incur loss equal to

Total Fixed Cost

95 Under perfect competition


96 The necessary condition for equilibrium position of a firm is


97 The most efficient scale of production of a firm is where

LAC is minimum

98 A firm should shut down in the short run if it is not covering its

Variable cost

99 Every factor of production gets reward equal to

Value of average product

100 Under perfect competition, demand for a factor is its

MRP curve