Test: Introduction To Economics - 1 - Commerce MCQ

• Statement i is correct as the economic problem stems from the conflict between limited resources and unlimited wants.
• Statement ii is incorrect because the decision of what to produce must consider the limitations of resources.
• Statement iii is incorrect because the distribution of goods does address income inequality.
• Statement iv is correct as alternative uses of resources necessitate choices in production.

Therefore, the correct statements are i and iv and the correct answer is Option A. 

• In a centrally planned economy, the government or central authority plays a direct role in ensuring that essential goods and services are available, either by encouraging individuals to produce them or by producing them themselves.
• This intervention is aimed at achieving the desired allocation of resources and ensuring fair distribution for the benefit of society as a whole.

• The concept of opportunity cost explains the decision-making process when choosing between two alternatives, such as a teacher deciding between teaching more hours or spending time on personal development.
• The opportunity cost is the value of the next best alternative that is forgone in making a decision.

• The assertion is correct because, in a market economy, prices do indeed act as signals that inform both producers and consumers about the availability and demand for goods and services.
• The reason is also correct, but it describes a characteristic of a centrally planned economy, not a market economy.
• Since the reason explains a different economic system, it does not serve as a correct explanation for the assertion.

• Statement i is incorrect as capital-intensive methods prioritize machinery over labor.
• Statement ii is correct because the choice of production techniques directly influences efficiency.
• Statement iii is incorrect since the distribution problem encompasses more than just personal income levels; it includes wealth distribution among different economic units.
• Statement iv is correct as it reflects the comprehensive nature of economic decision-making.

Thus, the correct statements are ii and iv and the correct answer is Option A. 

• Assertion (A) is true. Macroeconomics indeed studies aggregate economic measures such as total output and price levels.
• Reason (R) is also true, as it correctly describes the focus of microeconomics, which deals with individual markets.
• However, Reason (R) does not explain Assertion (A). Macroeconomics and microeconomics are distinct branches, and the focus of one does not serve as an explanation for the focus of the other.
• Therefore, the correct answer is Option B, as both statements are true but the Reason is not the correct explanation for the Assertion.

• The main economic issue comes from the limited availability of resources compared to the endless desires of people.
• This situation forces us to make decisions about which goods and services to create.
• We must also think about how to produce these goods and services.
• Another important question is who will receive these products.
• This challenge of making choices is essential for every economy.
• It is influenced by the fact that resources are not infinite.
• Therefore, the correct answer is Option B.

• Statement i is correct because scarcity forces us to make decisions about how to use our resources.
• Statement ii is incorrect since the main idea is about maximizing satisfaction for people, not just focusing on profit.
• Statement iii is correct because deciding between civil goods and war goods requires looking at what society needs and what resources are available.
• Statement iv is incorrect because making economic decisions is vital for fulfilling what consumers want.
• Therefore, the correct statements are i and iii and the correct answer is Option A. 

Answer: Option D

Solution:

• Opportunity Cost refers to the value of the next best alternative forgone (A-1).
• Scarcity indicates limited resources compared to unlimited wants (B-2).
• A Centrally Planned Economy is one where the government makes all decisions (C-3),
• while in a Market Economy, prices coordinate economic activities (D-4).

• Statement I is true because the rise in joint families post-independence in India is attributed to increased life expectancy, leading to a larger elderly population and more joint households.
• Statement II is false because the Production Possibility Frontier (PPF) represents the different combinations of goods that an economy can produce with limited resources, not unlimited resources.
• Therefore, Option C is the correct answer.