## Microeconomics Practice Paper

Q1. Who wrote ‘Nature and Causes of Wealth of Nations?

(b) Alfred Marshall

(c) Samuelson

(d) Robbins

Q2. Which economic problem involves the selection of a category of people who will ultimately consume the goods?

(a) How to produce

(b). For whom to produce

(c). What to produce

(d). None of these

ANS. For Whom To Produce

Q3. Which part of economic theory aims to determine the income and employment level of the economy?

(a). Macroeconomics

(b). Microeconomics

(c). Neither (a) nor (b)

(d). Both (a) and (b)

ANS. Macroeconomics

Assertion(A) and Reason (R). Choose one of the correct alternatives given below: Assertion(A): Human wants differ in priorities. Reason (R): For every individual, some wants are more important and urgent as compared to others.

(a) Both Assertion(A) and Reason(R) are true and Reason (R) is the correct explanation of Assertion

(b) Both Assertion (A) and Reason(R) are true and Reason (R) is not the correct explanation of Assertion

(c) Assertion(A) is true but Reason (R) is false.

(d) Assertion(A) is false but Reason(R) is true.

ANS. Both Assertion(A) and Reason(R) are true and Reason (R) is the correct explanation of Assertion

Q5. Worth a rupee to a consumer is called:

(a) marginal utility of money

(b) total utility of money

(c) diminishing marginal utility of money

(d) consumer’s equilibrium

ANS. marginal utility of money

Q6. According to the IC approach, at the point of equilibrium:

(a) the slope of IC > slope of the price line

(b) the slope of IC < slope of the price line

(c) the slope of IC ≠ slope of the price line

(d) the slope of IC = slope of the price line

ANS. the slope of IC = slope of the price line

Q7. The slope indifference curve is equal to:

(a) One

(b) marginal rate of substitution

(c) Marginal utility

(d) none of these

ANS. marginal rate of substitution

Q8. How are two goods (apple and orange) related when, as a result of rising in the price of apples, demand for oranges increases?

(a) substitute goods

(b) complementary goods

(c) normal goods

(d) inferior goods

ANS. substitute goods

Q9. The slope of the budget line is

(a) marginal opportunity cost

(b) marginal rate of substitution

(c) the market rate of exchange

(d) all of these

ANS. market rate of exchange

Q10. Consumer equilibrium through indifference curve analysis is based on

(a) Cardinal utility

(b) marginal utility

(c) ordinal utility

(d) none of these

ANS. ordinal utility

Q11. Read the following statements – Assertion (A) and Reason (R). Choose one of the correct alternatives given below: Assertion (A): Consumer equilibrium refers to a situation in which a consumer spends his income on the purchase of a commodity in such a way that gives him maximum satisfaction. Consumer equilibrium is determined at a point where marginal utility is equal to price (MUX = PX ). Reason (R): As long as MUX > PX, a consumer get more satisfaction as compared to the sacrifice he makes in terms

(a) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation

(b) Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion.

(c) Assertion (A) is true but Reason (R) is false.

(d) Assertion (A) is false but Reason (R) is true.

ANS. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation

Q12. The demand for normal goods with an increase in income of the consumer.

(a) increases

(b) decreases

(c) remain constant

(d) either increases or decreases

ANS. Increases

Q13. When two or more goods are demanded simultaneously, they are called:

(a) Joint demand

(b) alternative demand

(c) direct demand

(d) Composite demand

ANS. Joint Demand

Q14. A straight-line demand curve along which the price elasticity of demand equals 0 is one that

(a) forms a 60-degree angle with the horizontal axis.

(b) is vertical

(c) is horizontal

(d) forms a 45-degree angle with the vertical axis.

ANS. Is Vertical

Q15. The elasticity of demand for a commodity will be higher-

(a) The more of that commodity is considered a necessity

(b) The more is buyer’s demand loyalty.

(c) The more availability of substitutes

(d) All of the above

ANS. The more availability of substitutes