Fundamentals of Economics MCQs and Notes

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📊 Fundamentals of Economics
Q. The AR curve and industry demand curve are identical
  • (A) in case of monopoly
  • (B) in case of oligopoly
  • (C) in case of monopolistic competition
  • (D) in case of perfect competition
💬 Discuss
✅ Correct Answer: (D) in case of perfect competition

Explanation: In a perfectly competitive market, firms are price takers and have no control over the market price. As a result, their individual demand curve is also the market demand curve, and their marginal revenue curve is also the market average revenue curve, also known as the industry demand curve.

📊 Fundamentals of Economics
Q. Due to the operation of ‘Laws of return to Scale’ LAC curve is
  • (A) Rectangular hyperbola
  • (B) U-Shaped
  • (C) Parallel to the horizontal axis
  • (D) Parallel to the vertical axis
💬 Discuss
✅ Correct Answer: (B) U-Shaped
📊 Fundamentals of Economics
Q. Opportunity cost is measured in terms of the
  • (A) optional cost that has been avoided
  • (B) negative cost that has been sacrificed
  • (C) accounting cost that has been paid
  • (D) next best alternative that has been foregone
💬 Discuss
✅ Correct Answer: (D) next best alternative that has been foregone
📊 Fundamentals of Economics
Q. Which of the first order condition for the profit of a firm be maximum?
  • (A) AC = MR
  • (B) MC = MR
  • (C) MR = AR
  • (D) AC = AR
💬 Discuss
✅ Correct Answer: (B) MC = MR
📊 Fundamentals of Economics
Q. As output increases, AFC of a firm
  • (A) Increases
  • (B) remains constant
  • (C) continuously declines
  • (D) initially increases, afterwards declines
💬 Discuss
✅ Correct Answer: (C) continuously declines
📊 Fundamentals of Economics
Q. In a firm doubles all inputs, and output doubles as well, the firm is subject to
  • (A) constant returns to scale
  • (B) increasing returns to scale
  • (C) decreasing returns to scale
  • (D) economies of scale
💬 Discuss
✅ Correct Answer: (A) constant returns to scale
📊 Fundamentals of Economics
Q. A rational producer produces in that region where
  • (A) marginal physical product of the fixed input becomes negative
  • (B) marginal physical product of the variable input becomes negative
  • (C) marginal physical product of the fixed input becomes increasing
  • (D) marginal physical product of the variable input becomes declining
💬 Discuss
✅ Correct Answer: (D) marginal physical product of the variable input becomes declining
📊 Fundamentals of Economics
Q. Let a firm employs 10 labourers to produce 150 units of output. If 11 labourers are employed to produce 166 units of output, then the marginal product is
  • (A) 11
  • (B) 16
  • (C) 150
  • (D) 166
💬 Discuss
✅ Correct Answer: (B) 16
📊 Fundamentals of Economics
Q. In the case of inferior goods, the consumer
  • (A) purchases less with increase in income
  • (B) purchases less with decrease in price
  • (C) purchases more with increase in income
  • (D) purchases more with decrease in price
💬 Discuss
✅ Correct Answer: (A) purchases less with increase in income
📊 Fundamentals of Economics
Q. When excess demand occurs in an unregulated market, there is a tendency for:
  • (A) price to rise
  • (B) quantity supplied to decrease
  • (C) quantity demanded to increase
  • (D) price to fall
💬 Discuss
✅ Correct Answer: (A) price to rise

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