Economics MCQ set-1

Best of Economics MCQ questions for class 12 Economics students. These Economics MCQs are based on the building blocks of economics. Try all of them at your ease.
Economics MCQ for class 12 students
Q 1. The capital that is consumed by an economy or a firm in the production process is known as

A) Capital loss
B) Production cost
C) Dead-weight loss
D) Depreciation

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Answer: Option D
Solution: The capital that is consumed by an economy or a firm in the production process is known as Depreciation. In economics, depreciation is the gradual decrease in the economic value of the capital stock of a firm, nation or other entity, either through physical depreciation, obsolescence or changes in the demand for the services of the capital in question.


Q 2. Who propounded the opportunity cost theory of international trade?

A) Ricardo
B) Marshall
C) Heckscher & Ohlin
D) Haberler
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Answer: Option D
Solution: Haberler propounded the opportunity cost theory of international trade. Gottfried Haberler has attempted to restate the comparative costs in terms of opportunity cost. He demonstrates that the doctrine of comparative costs can hold valid even if the labour theory of value is discarded. The theory determines the cost of producing a commodity in terms of the alternative production that has to be foregone for producing the commodity in question.


Q 3. Which among the following statement is INCORRECT?

A) On a linear demand curve, all the five forms of elasticity can be depicted
B) If two demand curves are linear and intersecting each other, then, coefficient of elasticity would be same on different demand curves at the point of intersection.
C) If two demand curves are linear and parallel to each other, then, at a particular price, the coefficient of elasticity would be different on different demand curves.
D) The price elasticity of demand is expressed in terms of relaive not absolute changes in Price and Quantity demanded.
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Answer: Option B
Solution: If two demand curves are linear and intersecting each other, then, coefficient of elasticity would be different on different demand curves at the point of intersection.


Q 4. If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to

A) Increase
B) Decrease
C) Remain the same
D) Become zero
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Answer: Option A
Solution: If the demand for a good is inelastic, an increase in its price will cause the total expenditure of the consumers of the good to increase. Raising prices will always cause total revenue to increase.


Q 5. The horizontal demand curve parallel to x-axis implies that the elasticity of demand is

A) Zero
B) Infinite
C) Equal to 1
D) Greater than zero but less than infinity
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Answer: Option B
Solution: The horizontal demand curve parallel to x-axis implies that the elasticity of demand is infinite.It is zero when the demand curve is parallel to the y-axis.


Q 6. An individual demand curve slopes downward to the right because of the

A) Working of the law of diminishing marginal utility
B) Substitution effect of decrease in price
C) Income effect of fall in price
D) All of the above
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Answer: Option D
Solution: An individual demand curve slopes downward to the right because of the Working of the law of diminishing marginal utility, Substitution effect of decrease in price and Income effect of fall in price.


Q 7. Income elasticity of demand is defined as the responsiveness of

A) Quantity demanded to a change in income
B) Quantity demanded to a change in price
C) Price to a change in income
D) Income to a change in quantity demanded
Show Answer

Answer: Option A
Solution: Income Elasticity of Demand (YED) is defined as the responsiveness of demand when a consumer’s income changes. It is defined as the ratio of the change in quantity demand over the change in income. The higher the income elasticity, the more sensitive demand for a good is to changes in income.

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