Chapter -1 Introduction
Q 1. Assume that a PPF for butter and guns is drawn so that it is a straight line. It means:
a) Less and less units of butter are sacrificed to gain an additional unit of gun
b) More and more units of butter are sacrificed to gain an additional unit of gun
c) Same units of butter are sacrificed to gain an additional unit of gun
d) None of these
Q 2. Which of these is not an assumption of PPC?
a) Resources are fully and efficiently utilised
b) Resources in the economy are fixed
c) There is no change in level of technology
d) Resources are equally efficient in production of all products
Q 3. In which situation, can PPC be a straight line:
a) When MRT is decreasing
b) When MRT is increasing
c) When MRT is constant
d) None of these
Q 4. Suresh is working at a salary of ₹ 35,000 per month. He receives two job offers: (i) To
work as an accountant at a salary of ₹ 30,000 per month; (ii) To work as a sales manager at a
salary of ₹ 25,000 per month. In the given case, his opportunity cost will be:
a) ₹ 25,000
b) ₹ 30,000
c) ₹ 35,000
d) ₹ 65,000
Q 5. PPF is concave to the origin because of:
a) Increasing MRT
`
c) Constant MRT
b) Diminishing MRT
d) None of these
Q 6. Scarcity refers to limitation of _________ in relation to ________ for a commodity.
a) Demand, Sale
b) Demand, Supply
c) Supply, Demand
d) None of these
Q 7. A point outside the PPF indicates:
a) Fuller utilisation of resources
c) Unattainable combination
b) Underutilisation of resources
d) None of these
Q 8. Opportunity cost is the:
a) Number of units sacrificed
c) Cost of next best alternative foregone
b) Number of units gained
d) None of these
Q 9. Which of the following will not lead to shift in PPF?
a) Upgradation of Technology
c) Massive unemployment
b) Exploration of new oil reserves
d) Destruction of Resources
Q 10. Which part of economic theory aims to determine income and employment level of
the country?
a) Microeconomics
b) Macroeconomics
c) Neither (a) nor (b)
d) Both (a) and (b)
Q 11. Answer the following questions with the help of following diagram.
Y
G
Guns (in units)
A
B
C
D
F
E
O
(i)
(ii)
(iii)
X
Butter (in units)
Which of the following point represents underutilisation of resources?
a) G
b) E
b) A
d) F
Which of the following point represents fuller and efficient utilisation of
resources?
a) B
b) G
c) F
d) None of these
Which of the following point shows unattainable combination?
a) C
b) F
c) G
d) A
Q 12. Which of the following is related to Microeconomics?
a) Inflation in the economy
b) Unemployment Problem
c) National Income
d) Income from Postal department
Q 13. Which of the following illustrates a decrease in the unemployment using the PPC?
a) A movement down along the PPC
b) A rightward shift of the PPC
c) A movement from a point on the PPC to a point inside the PPC
d) A movement from a point inside the PPC to a point towards the PPC
Q 14. The problem of ‘What to produce’ covers the issue relating to:
a) What goods are to be produced
b) What quantities of goods to be produced
c) Both (a) and (b)
d) Neither (a) nor (b)
Guns (in units)
Q 15. Which point on the following PPC shows a “Productively efficient” level of output?
Y
a) A
G
b) B
A
c) E
B
d) All of these
C
D
F
E
O
Butter (in units)
Q 16. Which of these statements is true about production possibility curve?
a) It shows various combinations of two goods which yield same level of satisfaction
b) It shows various combination of two goods which an economy can produce with a
given amount of resources and technology
c) It shows various combination of two goods which an economy can produce with a
given budget
d) It shows various combination of two goods which an economy can produce with a
given time
Q 17. The shift in PPC is caused due to:
Guns (units)
Y
O
Butter (units)
X
a) Increase in resources for production of both the goods
b) Increase in resources for production of butter only
c) Increase in resources for production of guns only
d) None of these
X
Q 18. In the order of sequence, the point of ‘Underutilisation’ and ‘Unattainable’ are:
Y
F
A
Good Y
B
C
E
O
D
X
Good X
a) A and F
c) D and E
b) F and E
d) E and F
Q 19. Macroeconomics focuses on all of the following except:
a) Unemployment Problem
b) Inflation in the Economy
c) Aggregate Demand
d) Jute Industry
Q 20. The statements like ‘Economy should control pollution’ or ‘Unemployment in the
economy ought to be reduced’ fall within the scope of:
a) Normative Statements
b) Positive Statements
c) Both (a) and (b)
d) None of these
Q 21. An economy has 2 alternatives of production from the available resources: (i) 20X + 1Y;
or (ii) 18X + 2Y. If the economy chooses the second alternative, then what is the MOC of
producing Y?
a) 1X
b) 2X
c) 1Y
d) None of these
Q 22. In the context of rising prices, following statements are made by two people:
Mudit: Prices in the economy are continuously rising;
Shivam: The Government should take reasonable steps to control rising prices.
Identify the statements as Positive Statement and Normative Statement and Normative
Statement.
a) Udit: Positive; Shivam; Normative
b) Udit: Normative; Shivam; Positive
c) Both are Positive Statements
d) Both are Normative Statements
Q 23. In the given figure X1 Y1 and X2 Y2 are Production Possibility Curves in two different
periods T1 and T2 respectively for Good X and Good Y. A1 and A2 represent actual outputs and
P1 and P2 represent potential outputs respectively in the two time periods.
Good Y
Y2
P2
Y1
A2
P1
A1
O
X1 X2
Good X
The change in actual output of Goods X and Y over the two periods would be represented by
movement from _______ (Fill up the blank).
a) A2 to P2
b) A1 to P2
c) P1 to A2
d) A1 to A2
Q 24. Positive Economic analysis is concerned with:
a) Opinions
c) Facts and Figures
b) Value Judgements
d) Ideals
Q 25. Out of the following, which one is Macro variable?
a) Production of Food Grains in India
b) Pricing decision by Tata Motors
c) Measurement of general Price Level
d) Fall in Petrol Prices
Q 26. If there is unemployment in the economy, then we would be producing _________ the
PPC.
a) Below
b) Above
c) On
d) None of the above
Q 27. Read the following statement- Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Production Possibility Frontier (PPF) is a Concave Shaped curve.
Reason (R): PPF shows all the maximum possible combination of two goods, which can be
produced with the available resources and technology.
Alternatives
a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation
of Assertion (A)
b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct
explanation of Assertion (A)
c) Assertion (A) is True, but Reason (R) is False
d) Assertion (A) is False, but Reason (R) is True
Q 28. Read the following statement- Assertion (A) and Reason (R). Choose one of the correct
alternatives given below:
Assertion (A): Macroeconomics is also known as Income and Employment Theory.
Reason (R): Macroeconomics aims to determine income and employment level of the
economy.
Alternatives
a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct explanation
of Assertion (A)
b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct
explanation of Assertion (A)
c) Assertion (A) is True, but Reason (R) is False
d) Assertion (A) is False, but Reason (R) is True
Q 29. Read the following statements carefully and choose the correct alternative from the
following:
Statement 1: Scarcity is universal as every individual, organisation and economy faces
scarcity of resources.
Statement 2: There would have been no economic problem, if resources were not scarce.
Alterantives:
a) Both the statement are true
b) Both the statement are false
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false
Q 30. Read the following statements carefully and choose the correct alternative from the
following:
Statement 1: Positive economics statements are statements of truth.
Statement 2: Positive economics aims to make real description of an economic actively.
Alterantives:
a) Both the statement are true
b) Both the statement are false
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false
Q 31. Read the following statements carefully and choose the correct alternative from the
following:
Statement 1: Production Possibility Frontier will shift towards left when there is decrease in
resources with respect to both the goods.
Statement 2: An economy cannot operate at any point outside Production Possibility
Frontier as it is unattainable with the available productive capacity.
Alterantives:
a) Both the statements are true
b) Both the statements are false
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false
Q 32. Read the following statements carefully and choose the correct alternative from the
following:
Statement 1: Marginal rate of transformation increases because it is assumed that all
resources are equally efficient in production of all goods.
Statement 2: There exists a direct relationship between change in quantity of one
commodity and change in quantity of the other commodity in case of production Possibility
Frontier.
Alterantives:
a) Both the statements are true
b) Both the statements are false
c) Statement 1 is true and Statement 2 is false
d) Statement 2 is true and Statement 1 is false
Q 33. Read the following statements carefully and choose the correct alternative from the
following:
Assertion (A): PPC is downward sloping in nature from left to right.
Reason (R): Resources are fixed in nature.
Alternatives:
a) Both Assertion (A) and Reason (R) is correct and Reason (R) is the correct explanation
of Assertion (A)
b) Both Assertion (A) and Reason (R) is correct and Reason (R) is not the correct
explanation of Assertion (A)
c) Assertion (A) is true and Reason (R) is false
d) Assertion (A) is false and Reason (R) is true
Q 34. Which of the following is not an assumption of PPC?
a) Resources are fixed
b) Economy produces two goods
c) Resources are equally efficient in the production of all the goods
d) State of technology is constant
Q 35. Which of the following statements is false?
a) A point above PPC represents growth of resources
b) Due to unemployment, production in economy is below its potential
c) PPC shows what an economy can potentially produce rather than what it actually
produces
d) Inflow of foreign capital will cause rise in production potential leading to economic
growth
Q 36. When an economy is operating on the PPC, it indicates:
a) Potential output > Actual output
b) Potential Output = Actual Output
c) Potential Output < Actual Output
d) None of these
Q 37. Due to Globalisation, there was increase in foreign investments in India. This led to
_________.
a) Shift towards left
b) Movement inside the PPC
c) Movement on the PPC
d) Shift towards right
Q 38. Which of the following is not an assumption of PPC?
(i) State of technology keeps on changing
(ii) Number of resources in the economy is fixed
(iii) Resources are fully employed
(iv) When resources are transferred from one use to another, their efficiency increases
(a) (i), (ii) and (iii)
b) (ii) and (iii)
(c) (i) and (iv)
d) (ii), (iii) and (iv)
Q 39. Problem of “For Whom to produce” is guided by allocation of resources in such a
manner that _____________.
a) Maximum output is produced at a minimum cost
b) Urgent needs of factors of production are satisfied
c) Aggregate satisfaction is maximized
d) None of the above
Q 40. Match the following.
Column I
Column II
(a) Introduction of MNREGA
(i) Shift towards right
(b) Increased brain drain from India
(ii) Movement towards PPC
(c) Foreign Investments in India
(iii) Shift towards left
(d) Due to lockdown in India, there is
(iv) Movement inside the PPC
decline in business activities and operations
(a) (a) – (ii), (b) – (iii), (c)-(i), (d)- (iv)
(b) (a) – (i), (b) – (iv), (c) –(ii), (d)- (iii)
(c) (a) – (iii), (b)- (i), (c)- (iv), (d)- (ii)
(d) (a)- (iv), (b)- (ii), (c) –(iii), (d)- (i)
Q 41. Match the following.
Column I
(a) Unemployment Problem in India
(b) Population of India is increasing at a rate of
2% per annum
(c) Lockdown should be extended to
curtail COVID Pandemic
(d) Apple Industry
(a) (a)- (ii), (b)-(iii), (c)-(iv), (d)-(i)
(b) (a) – (i), (b) – (iv), (c) –(ii), (d)- (iii)
(c) (a) – (iii), (b)- (i), (c)- (iv), (d)- (ii)
(d) (a)- (iv), (b)- (ii), (c) –(iii), (d)- (i)
Column II
(i) Microeconomics
(ii) Macroeconomics
(iii) Positive Economics
(iv) Normative Economics
Q 42. ____________ deals with actual facts and figures and do not involve judgements.
a) Positive Economics
b) Normative Economics
c) Microeconomics
d) Macroeconomics
Q 43. PPC would be a straight line when_____________.
a) For every additional unit of X, economy has to sacrifice less number of units of Y
b) For every additional unit of X, economy has to sacrifice more number of units of Y
c) For every additional unit of X, economy has to sacrifice same number of units of Y
d) None of the above
Q 44. Read the following statements carefully and choose the correct alternative from the
following:
Assertion (A): Aggregate Demand and Aggregate Supply are the tools to study
macroeconomics.
Reason (R): Macroeconomics deals with economy as a whole.
Alternatives:
a) Both Assertion (A) and Reason (R) is correct and Reason (R) is the correct explanation
of Assertion (A)
b) Both Assertion (A) and Reason (R) is correct and Reason (R) is not the correct
explanation of Assertion (A)
c) Assertion (A) is true and Reason (R) is false
d) Assertion (A) is false and Reason (R) is true
Q 45. The shape of PPC identified in previous question is because of____________.
a) When resources are transferred from one use to another, their efficiency increases
b) When resources are transferred from one use to another, their efficiency decreases
c) When resources are transferred from one use to another, their efficiency remains
unchanged
d) Cant’s say
Q 46. Read the following statements carefully and choose the correct alternative from the
following:
Statement I: PPC is convex to origin due to increasing MRT.
Statement II: Increasing MRT means in order to increase the production of one goods,
economy has to sacrifice more and more of the good because resources are fixed.
Alternatives:
a) Both the statements are correct
b) Both the statements are incorrect
c) Statement I is correct, and Statement II is incorrect
d) Statement I is incorrect, and Statement II is correct
Q 47. Read the following statements carefully and choose the correct alternative from the
following:
Statement I: For whom to produce deals with the distribution of income in the economy.
Statement II: Problem of how to produce is based on the principle that allocate resources in
such a manner that aggregate satisfaction is maximised.
Alternatives:
a) Both the statements are correct
b) Both the statements are incorrect
c) Statement I is correct, and Statement II is incorrect
d) Statement I is incorrect, and Statement II is correct
Q 48. Read the following statements carefully and choose the correct alternative from the
following:
Statement I: Since positive economics deals with facts, therefore, it has time dimension.
Statement II: Normative Economics involves the study of statements which deals with
idealistic situations.
Alternatives:
a) Both the statements are correct
b) Both the statements are incorrect
c) Statement I is correct, and Statement II is incorrect
d) Statement I is incorrect, and Statement II is correct
Q 49. Which of the following statements is incorrect?
a) Due to scarcity of resources, there is a need to prioritize our choices
b) Prioritizing of choices is called as Economics
c) Resources are scarce and limited in comparison to unlimited human wants
d) All of the above
Q 50. Mr. Aman is a finance manager in XYZ Ltd. He is earning a salary of ₹ 150,000 per
month. Before joining this job, he had two other offers as well offering him ₹ 100,000 and
₹95,000 respectively. The opportunity cost of being a finance manager is __________.
a) ₹ 95,000
b) ₹ 100,000
c) ₹ 195,000
d) ₹ 50,000
ANSWER KEYS
Ans 1. c) Same units of butter are sacrificed to gain an additional unit of gun
Ans 2. d) Resources are equally efficient in production of all products
Ans 3. c) When MRT is constant
Ans 4. b) ₹ 30,000
Ans 5. a) Increasing MRT
Ans 6. c) Supply, Demand
Ans 7. c) Unattainable combination
Ans 8. c) Cost of next best alternative foregone
Ans 9. c) Massive unemployment
Ans 10. b) Macroeconomics
Ans 11. (i- d, ii -a, iii- c)
Ans 12. d) Income from Postal department
Ans 13. d) A movement from a point inside the PPC to a point towards the PPC
Ans 14. c) Both (a) and (b)
Ans 15. d) All of these
Ans 16. b) It shows various combination of two goods which an economy can produce with a
given amount of resources and technology
Ans 17. a) Increase in resources for production of both the goods
Ans 18. d) E and F
Ans 19. d) Jute Industry
Ans 20. a) Normative Statements
Ans 21. b) 2X
Ans 22. a) Udit: Positive; Shivam; Normative
Ans 23. d) A1 to A2
Ans 24. c) Facts and Figures
Ans 25. c) Measurement of general Price Level
Ans 26. a) Below
Ans 27. b) Both Assertion (A) and Reason (R) are True and Reason (R) is not the correct
explanation of Assertion (A)
Ans 28. a) Both Assertion (A) and Reason (R) are True and Reason (R) is the correct
explanation of Assertion (A)
Ans 29. a) Both the statement are true
Ans 30. d) Statement 2 is true and Statement 1 is false
Ans 31. a) Both the statements are true
Ans 32. b) Both the statements are false
Ans 33. a) Both Assertion (A) and Reason (R) is correct and Reason (R) is the correct
explanation of Assertion (A)
Ans 34. c) Resources are equally efficient in the production of all the goods
Ans 35. a) A point above PPC represents growth of resources
Ans 36. b) Potential Output = Actual Output
Ans 37. d) Shift towards right
Ans 38. (c) (i) and (iv)
Ans 39. b) Urgent needs of factors of production are satisfied
Ans 40. (a) – (ii), (b) – (iii), (c)-(i), (d)- (iv)
Ans 41. (a)- (ii), (b)-(iii), (c)-(iv), (d)-(i)
Ans 42. a) Positive Economics
Ans 43. c) For every additional unit of X, economy has to sacrifice same number of units of Y
Ans 44. a) Both Assertion (A) and Reason (R) is correct and Reason (R) is the correct
explanation of Assertion (A)
Ans 45. a) When resources are transferred from one use to another, their efficiency
increases
Ans 46. b) Both the statements are incorrect
Ans 47. c) Statement I is correct, and Statement II is incorrect
Ans 48. a) Both the statements are correct
Ans 49. b) Prioritizing of choices is called as Economics
Ans 50. b) ₹ 100,000