Class 12 Economics Quiz (Microeconomics and Macroeconomics)

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Which principle best captures the concept of opportunity cost in economics?

The law of diminishing returns

The law of demand

The law of supply

The concept of trade-offs

In perfect competition, which of the following statements is true?

There are only a few firms in the market.

Firms have significant control over the market price.

Products are homogeneous.

Firms can easily differentiate their products.

How does the Subsistence Theory of Wages view the relationship between wages and population growth?

Wages determine population growth.

Wages and population growth are inversely related.

Wages and population growth are independent of each other.

Population growth determines wages.

What is one of the primary goals of expansionary monetary policy?

To control inflation

To decrease aggregate demand

To reduce government spending

To stimulate economic growth and increase employment

In an economy where the division of labor is well-established, what is the likely impact on productivity and efficiency?

Productivity decreases due to increased specialization.

Efficiency decreases due to reduced skill development.

Productivity increases due to workers focusing on specific tasks.

Efficiency increases due to workers performing multiple tasks simultaneously.

How do banks contribute to financial intermediation?

By investing in government securities

By providing insurance services

By facilitating the transfer of funds between savers and borrowers

By regulating the stock market

In the context of monetary policy, what role do banks play?

Banks implement monetary policy decisions made by the government.

Banks have no role in monetary policy.

Banks advise the central bank on monetary policy matters.

Banks independently set monetary policy objectives.

If a firm's Average Cost (AC) is decreasing, what can be inferred about its Marginal Cost (MC)?

MC is greater than AC

MC is equal to AC

MC is less than AC

MC is increasing

In the context of F.B. Hawley's Risk Theory of Profit, what would likely happen to profit if the level of uncertainty in the business environment increases?

Profit decreases

Profit remains unchanged

Profit increases

Profit becomes negative

10.

If an economy experiences technological advancements that improve the efficiency of production, what is the likely effect on its production possibility curve (PPC)?

The PPC will shift outward, indicating increased potential for production.

The PPC will shift inward, reflecting reduced resources available for production.

The PPC will rotate clockwise, suggesting a decrease in the efficiency of production.

The PPC will rotate counterclockwise, indicating improved resource allocation but no change in potential production.

11.

According to F.B. Hawley's Risk Theory of Profit, what role does risk play in the business environment?

Risk has no influence on profit.

Higher risk leads to lower profits.

Higher risk leads to higher profits.

Risk is irrelevant in determining profit.

12.

In a hypothetical scenario where a country has a trade surplus but a deficit in its overall balance of payments, which of the following could be a possible explanation?

The country’s exports and imports are both low, but it receives substantial foreign loans and grants. What’s the answer to this question?

The country’s imports exceed its exports, but it receives significant inflows of remittances from citizens working abroad.

The country’s exports exceed its imports, but it has a large outflow of investment income and foreign aid payments.

The country’s exports and imports are balanced, but it has a high level of foreign direct investment.

13.

What is "escheat" in the context of government revenue?

A tax levied on inheritances and estates

A fee charged for the registration of legal documents

The process by which unclaimed property reverts to the state

An excise tax on specific goods and services

14.

Ricardo's theory of rent implies that rent is a:

Variable cost of production

Fixed cost of production

Surplus above the cost of production

Tax imposed by the government on landowners

15.

What are some examples of instruments traded in the money market?

Corporate stocks and bonds

Treasury bills and commercial paper

Common shares and preferred stocks

Mortgage-backed securities

16.

In the Classical Theory of Interest, what role does savings play in determining the interest rate?

Savings have no impact on the interest rate.

Higher savings lead to lower interest rates.

Higher savings lead to higher interest rates.

Savings directly determine the level of investment, which in turn affects the interest rate.

17.

How does a central bank typically implement an expansionary monetary policy?

By selling government securities in the open market

By increasing reserve requirements for commercial banks

By decreasing the discount rate

By raising taxes

18.

What does the Subsistence Theory of Wages suggest?

Wages are determined by the demand and supply of labor.

Wages are set by the government to ensure a minimum standard of living for workers.

Wages tend to settle at the minimum level necessary to sustain workers’ basic needs.

Wages are determined by the productivity of labor.

19.

What is one of the primary functions of a central bank?

Issuing currency

Directly lending to individuals and businesses

Managing government fiscal policy

Regulating commercial banks

20.

Which theory is associated with the development of the Subsistence Theory of Wages?

Malthusian Theory of Population

Law of diminishing returns

Law of subsistence wage

Theory of Laissez-faire

21.

In a monopolistic market, at what level of output does Marginal Revenue (MR) become zero?

When MR equals Average Revenue (AR)

When MR intersects the horizontal axis

When MR intersects the vertical axis

When MR equals Total Revenue (TR)

22.

What does the Risk Theory of Profit by F.B. Hawley emphasize?

Profit arises solely from exploiting market imperfections.

Profit is the reward for bearing risk in business.

Profit results from maximizing market share.

Profit is determined by the level of government regulation.

23.

Which economist is credited with developing the Comparative Cost Theory of International Trade?

Adam Smith

John Maynard Keynes

Karl Marx

David Ricardo

24.

According to the Comparative Cost Theory of International Trade, which of the following is a key determinant of a country's comparative advantage in producing a particular good?

Absolute productivity levels

Absolute resource endowments

Relative opportunity costs of production

Relative levels of technology

25.

How do central banks use commercial banks to implement monetary policy?

By directly controlling interest rates in the financial markets

By regulating the amount of reserves commercial banks must hold

By providing loans to commercial banks at preferential rates

By issuing directives to commercial banks regarding lending practices

26.

In the long run, in a perfectly competitive market, what happens to the economic profit of a firm?

Economic profit remains constant.

Economic profit increases indefinitely.

Economic profit decreases to zero.

Economic profit becomes negative.

27.

What is the primary objective of monetary policy conducted by central banks?

Maximizing employment

Minimizing government debt

Maintaining price stability

Encouraging economic growth

28.

In break-even analysis, the term "break-even point" refers to the level of output where:

Total revenue equals total variable cost

Total revenue equals total fixed cost

Total revenue equals total cost

Marginal revenue equals marginal cost

29.

Who is associated with the development of the Wage Fund Theory of Wages?

Adam Smith

David Ricardo

Karl Marx

John Stuart Mill

30.

What is one of the primary goals of contractionary monetary policy?

To increase government spending

To stimulate economic growth

To control inflation

To reduce interest rates

31.

Which of the following is correct measure of Net Profit?

Gross Profit + Implicit cost

Gross Profit – Explicit cost

Gross Profit + Explicit Cost

Gross Profit – Implicit Cost

32.

How does a central bank typically conduct monetary policy?

By directly controlling interest rates in the financial markets

By issuing directives to commercial banks regarding lending practices

By setting reserve requirements for commercial banks

By buying and selling government securities in the open market

33.

In a globalized economy where countries have embraced free trade, which of the following is a potential consequence?

Increased competition leading to lower prices for consumers

Protection of domestic industries from foreign competition

Higher tariffs and quotas restricting international trade

Decreased specialization and efficiency in production

34.

If a country experiences a decrease in its labor force due to emigration, which of the following is likely to occur to its production possibility curve (PPC)?

The PPC will shift outward, indicating increased potential for production.

The PPC will shift inward, reflecting a decrease in available resources for production.

The PPC will remain unchanged, as emigration does not directly affect resource efficiency.

The PPC will rotate counterclockwise, suggesting improved efficiency due to a smaller labor force.

35.

If a government imposes a higher tax rate on luxury goods compared to essential goods, the impact of this direct tax policy on consumers is most likely to:

Decrease consumption of luxury goods while increasing consumption of essential goods.

Increase consumption of luxury goods while decreasing consumption of essential goods.

Lead to a decrease in overall consumption due to higher tax rates.

Have no impact on consumption patterns.

36.

In a mature capitalist economy where monopolistic tendencies are mitigated by regulatory measures, which factor most significantly influences the allocation of resources and distribution of goods and services?

Socioeconomic equality initiatives

Entrepreneurial spirit and risk-taking behavior

Technological innovation and intellectual property rights

Interplay between market competition and consumer sovereignty

37.

What is a common barrier to entry in a monopoly market?

Perfect information

Homogeneous products

Economies of scale

Numerous competitors

38.

According to the Wage Fund Theory, what happens if the labor force increases while the wage fund remains constant?

Wages increase.

Wages decrease.

Wages remain unchanged.

Wages fluctuate based on market demand.

39.

How does the Classical Theory of Interest view the relationship between saving and investment?

Saving always equals investment

Saving always exceeds investment

Saving always falls short of investment

Saving and investment are independent of each other

40.

In economics, which of the following best describes economic rent and contract rent?

Economic rent represents the opportunity cost of resources, while contract rent represents the actual payment made for those resources.

Economic rent and contract rent are synonymous terms and refer to the same concept in economics.

Economic rent represents the payment made to factors of production in excess of their opportunity cost, while contract rent is the actual payment agreed upon in a rental contract.

Economic rent represents the actual payment made in a rental contract, while contract rent represents the payment made to factors of production in excess of their opportunity cost.

41.

According to the Subsistence Theory of Wages, what happens when wages rise above the subsistence level?

Workers become more productive.

Population growth increases.

Unemployment decreases.

Employers hire more workers.

42.

Which of the following best describes the money market?

A market for buying and selling long-term securities such as stocks and bonds

A market where central banks conduct monetary policy through open market operations

A market where currencies are traded

A market for short-term debt securities with maturities typically less than one year

43.

What criticism is often directed towards the Wage Fund Theory of Wages?

It ignores the role of supply and demand in determining wages.

It assumes a fixed and finite fund, which is unrealistic.

It overestimates the influence of employers on wage levels.

It neglects the impact of government regulations on labor markets.

44.

In economics, what do money wages refer to?

The nominal amount of money paid for labor.

The quantity of goods and services that can be purchased with a given nominal wage.

The inflation-adjusted purchasing power of wages.

The value of labor in terms of other goods and services in the economy.

45.

Which of the following best describes the relationship between land fertility and rent in the Ricardian theory?

Rent is determined solely by land size, not fertility

Fertility does not affect rent

Higher fertility leads to lower rent

Higher fertility leads to higher rent

46.

Which of the following best describes the infant industry argument often cited in favor of protectionist policies?

Limiting imports protects consumers from inferior foreign goods and services.

Free trade agreements prioritize the growth of established industries over the development of new ones.

Encouraging international competition strengthens domestic industries, even if they are not initially competitive.

Protecting emerging industries from foreign competition allows them to mature and become competitive over time.

47.

What does Total Cost (TC) represent in economics?

The cost of producing one additional unit of output

The cost per unit of output

The total fixed and variable costs of production

The average cost of producing one unit of output

48.

What does the real wage measure in economics?

The nominal amount of money earned by workers.

The purchasing power of wages adjusted for inflation.

The difference between the wages of skilled and unskilled workers.

The wage rate set by the government.

49.

In a progressive tax system:

Everyone pays the same amount of tax regardless of income.

High-income earners pay a higher percentage of their income in taxes compared to low-income earners.

Low-income earners pay a higher percentage of their income in taxes compared to high-income earners.

Tax rates decrease as income levels increase.

50.

In perfect competition, where does a profit-maximizing firm produce in the short run?

At the point where marginal revenue equals marginal cost

At the point where average total cost is minimized

At the point where price equals average variable cost

At the point where total revenue exceeds total cost

51.

According to the Ricardian theory of rent, which of the following best describes the relationship between grades of land and rent?

Higher grades of land command higher rents due to their superior fertility.

Higher grades of land command lower rents due to their scarcity.

All grades of land command the same rent regardless of their fertility or location.

Rent is not applicable to land in the Ricardian theory.

52.

In a socialist economy transitioning from central planning to market-oriented reforms, which factor presents the greatest challenge to the efficiency of resource allocation and production?

Government bureaucracy and red tape

Lack of private property rights and incentives

Resistance from vested interests and state-owned enterprises

Inadequate infrastructure and technological innovation

53.

What role do banks play in the process of money creation?

Banks do not participate in money creation.

Banks create money by lending out deposits.

Banks create money by borrowing from the central bank.

Banks create money by issuing government bonds.

54.

In a market economy characterized by scarcity, which of the following scenarios would likely occur?

Prices of goods and services remain stable over time due to consistent demand and supply.

Consumers have unlimited access to all goods and services they desire without any constraints.

Producers face no restrictions on the resources needed to produce goods and services.

Individuals must make trade-offs when allocating limited resources to fulfill unlimited wants and needs.

55.

When Marginal Cost (MC) is below Average Cost (AC), what can be said about AC?

AC is at its minimum

AC is decreasing

AC is increasing

AC is constant

56.

If a firm's Total Cost (TC) is $500 and it produces 100 units of output, what is its Average Cost (AC) per unit?

$50

$0.05

$500

57.

In an economy facing the problem of allocating scarce resources, which economic system relies primarily on market forces to determine resource allocation?

Command economy

Traditional economy

Mixed economy

Market economy

58.

In the context of the Comparative Cost Theory of International Trade, what does it mean if a country has a comparative advantage in producing a particular good?

The country produces that good using fewer resources compared to other countries.

The country produces that good using more resources compared to other countries.

The country has a monopoly on the production of that good.

The country has no trade barriers in place for that particular good.

59.

On a production possibility curve (PPC), if an economy is operating at a point inside the curve, what does it signify?

The economy is experiencing full employment and efficiency.

The economy is utilizing resources inefficiently, leading to unemployment.

The economy is experiencing economic growth beyond its current capacity.

The economy is producing at its maximum potential with available resources.

60.

In the Ricardian theory of rent, the rent paid for land is determined by:

The highest bid among potential tenants

The government’s assessment of the land’s value

The difference between the price of agricultural products and the cost of production

The marginal productivity of land

61.

In a mixed economy, which entity typically plays a significant role in both regulating economic activities and providing public goods and services?

Private corporations and businesses

Government institutions and agencies

Non-profit organizations and charities

Trade unions and labor organizations

62.

How does a central bank typically implement a contractionary monetary policy?

By buying government securities in the open market

b) By decreasing reserve requirements for commercial banks

By selling government securities in the open market

By lowering taxes

63.

What does the Wage Fund Theory of Wages propose?

Wages are determined by the demand and supply of labor.

Wages are fixed by the government to ensure a fair wage for workers.

There exists a fixed fund from which all wages are paid, and this fund determines wage levels.

Wages are determined solely by the productivity of labor.

64.

In a perfectly competitive market, what relationship exists between Total Revenue (TR) and Average Revenue (AR) when output is maximized?

TR = AR

TR > AR

TR < AR

TR varies independently of AR

65.

According to David Ricardo's theory of rent, rent arises due to:

Differences in land ownership

Differences in land fertility

Differences in land size

Differences in land location

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