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Test: Pure Economic- 1 - UPSC MCQ


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10 Questions MCQ Test - Test: Pure Economic- 1

Test: Pure Economic- 1 for UPSC 2024 is part of UPSC preparation. The Test: Pure Economic- 1 questions and answers have been prepared according to the UPSC exam syllabus.The Test: Pure Economic- 1 MCQs are made for UPSC 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Pure Economic- 1 below.
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Test: Pure Economic- 1 - Question 1
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What is the primary function of economic theory?

Detailed Solution for Test: Pure Economic- 1 - Question 1
Economic theory primarily aims to establish cause and effect relationships between economic variables. It helps us understand how changes in one economic variable can impact others. While prediction is one of the functions of economic theory, its core role is to provide a framework for analyzing and explaining economic phenomena.
Test: Pure Economic- 1 - Question 2
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In the law of demand, what does "other things being equal" imply?

Detailed Solution for Test: Pure Economic- 1 - Question 2
"Other things being equal" in the law of demand means that all factors influencing demand, apart from the price of the commodity, are assumed to be constant. This allows economists to isolate the relationship between price and quantity demanded without other variables affecting the outcome.
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Test: Pure Economic- 1 - Question 3
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Which factor is NOT considered when determining the price elasticity of demand?

Detailed Solution for Test: Pure Economic- 1 - Question 3
Consumer income is considered when studying the cross-elasticity of demand (how the demand for one good responds to changes in the income of consumers). Price elasticity of demand primarily focuses on how the quantity demanded changes in response to price variations, considering factors like substitutes, time period, and proportion of income spent on the commodity.
Test: Pure Economic- 1 - Question 4
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What causes a increase in demand for a commodity?
Detailed Solution for Test: Pure Economic- 1 - Question 4

A decrease in the price of complementary goods leads to a increase in the demand for given commodity and vice versa. For example if price of a complementary good (say petrol) decreases, then demand for given commodity (say car) will rise.

Test: Pure Economic- 1 - Question 5
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What type of demand is associated with perfectly elastic demand?
Detailed Solution for Test: Pure Economic- 1 - Question 5
Perfectly elastic demand is a situation where the quantity demanded remains the same regardless of changes in price. In other words, it's a case of perfectly inelastic demand. There is no change in quantity demanded with changes in price.
Test: Pure Economic- 1 - Question 6
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What factor makes the demand for a commodity more elastic?
Detailed Solution for Test: Pure Economic- 1 - Question 6
The demand for a commodity becomes more elastic when the proportion of income spent on that commodity is small. In such cases, consumers are more responsive to price changes because the commodity represents a smaller portion of their budget.
Test: Pure Economic- 1 - Question 7
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Under which market structure does a firm have the most control over price?
Detailed Solution for Test: Pure Economic- 1 - Question 7
A firm has the most control over price under a monopoly. In a monopoly, there is only one seller, and that seller can set the price for its product, as there are no close substitutes and no competition to dictate the price.
Test: Pure Economic- 1 - Question 8
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What is the distinguishing feature of monopolistic competition?
Detailed Solution for Test: Pure Economic- 1 - Question 8
The distinguishing feature of monopolistic competition is product differentiation. In this market structure, firms produce differentiated products, which means they are not perfect substitutes for each other. This product differentiation gives firms some control over price.
Test: Pure Economic- 1 - Question 9
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What is the primary difference between private cost and social cost?
Detailed Solution for Test: Pure Economic- 1 - Question 9
The primary difference between private cost and social cost is that social cost includes externalities, which are costs or benefits that affect third parties not directly involved in a transaction. Private cost only considers the costs incurred by the individual firm or producer, while social cost takes into account the broader societal impacts, including externalities.
Test: Pure Economic- 1 - Question 10
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What is the concept of opportunity cost based on?
Detailed Solution for Test: Pure Economic- 1 - Question 10
The concept of opportunity cost is based on the value of a resource in its next best alternative use. It represents the cost of forgoing the next best opportunity when a resource is allocated to a particular use.
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