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Economics Questions and Answers for Competitive Exams | Indian Economy Quiz Set 27

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(1) What does ‘Price Scissors’ refer to ?
(1) Marshall’s example of forces of supply and demand.
(2) Exports of two strategic raw materials from a country.
(3) A sharp fall in price of a major export item accompanied by a sharp rise in price of a major import
(4) Export basket of competitive local manufactures
Answer: A sharp fall in price of a major export item accompanied by a sharp rise in price of a major import
(2) Hedging in the foreign exchange market refers to :
(1) An act of devaluation.
(2) Not covering a risk of foreign exchange in future.
(3) Covering a risk of foreign exchange in future.
(4) None of the above.
Answer: Covering a risk of foreign exchange in future.

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(3) Tax incidence refers to :
(1) Whether a tax is progressive, proportional or regressive.
(2) How often a tax is collected.
(3) The person or group who ends up paying a tax.
(4) How a tax is collected.
Answer: The person or group who ends up paying a tax.
(4) Given the production function Q52 K1 3 . L2 3 , find the output level when 8 units of capital and 27 units of labour are used.
(1) 36
(2) 54
(3) 18
(4) 24
Answer: 36
(5) If OLS is applied separately to each equation that is part of a simultaneous interdependent system, the resulting estimates will be :
(1) Unbiased and consistent
(2) Biased and consistent
(3) Biased and inconsistent
(4) It is impossible to apply OLS to the equations that are part of a simultaneous system
Answer: Biased and inconsistent
(6) Which one of the following is not a plausible remedy for multicollinearity ?
(1) Use principal components analysis
(2) Drop one of the collinear variables
(3) Use a longer-run of data
(4) Take logarithm of each of the variables
Answer: Take logarithm of each of the variables
(7) In which one of the following market situations are the firms mutually interdependent in pricing and output decisions ?
(1) Oligopoly
(2) Monopsony
(3) Monopoly
(4) Monopolistic Competition
Answer: Oligopoly
(8) A tax is said to be buoyant if tax revenue is proportionally :
(1) More responsive to changes in output
(2) Less responsive to changes in output
(3) Equally responsive to changes in tax base
(4) Less responsive to changes in tax base
Answer: More responsive to changes in output
(9) “Value and Capital” is written by who among the following economists ?
(1) Hanson
(2) Philipes
(3) Ursula
(4) J.R. Hicks
Answer: J.R. Hicks
(10) Giffen paradox occurs when income effect is :
(1) Greater than the substitution effect
(2) Equal to the substitution effect
(3) Less than the substitution effect
(4) Negative and is greater than the substitution effect
Answer: Negative and is greater than the substitution effect
(11) Which one of the following curves will respond the supply curve of labour ?
(1) Marginal product curve of labour
(2) Marginal revenue product curve of labour
(3) Value of marginal product curve of labour
(4) Average product curve of labour
Answer: Marginal product curve of labour
(12) Limit price refers to the :
(1) Price which maximizes the profits of the firm
(2) Price which prevents entry of new firms
(3) Price at which firm just starts earning a surplus over cost
(4) Maximum price which the firm is allowed to charge
Answer: Price which prevents entry of new firms
(13) Intellectual property rights regime is managed by :
(1) IMF
(2) W.T.O.
(3) European Union
(4) SAARC
Answer: W.T.O.
(14) According to Heckscher - ohlin theorem, a nation will export a commodity which is :
(1) Intensive in its relatively abundant factor
(2) Intensive in its relatively cheap factor
(3) Both (1) and (2) are necessary
(4) Neither (1) nor (2) in necessary
Answer: Both (1) and (2) are necessary
(15) Customs union always leads to :
(1) Trade diversion effect alone
(2) Trade creation effect alone
(3) Both trade creation and trade diversion effects
(4) Neither trade diversion nor trade creation effect
Answer: Both trade creation and trade diversion effects

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