Microeconomics MCQ with Solutions PDF Download 2025

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Microeconomics mcq with Solutions PDF Download for Students

Which of the following statements is correct? In a competitive asset market, the value of a bond in equilibrium must always match its present value.

a) In a competitive asset market, the price of a bond must be below its present value for the seller to gain.

b) In a competitive asset market, the price of a bond should exceed its present value for the buyer to benefit.

c) In a competitive asset market, the present value should be greater than the bond’s price for the seller to gain.

d) When the interest rate increases, the demand for Money will

Option a – In a competitive asset market, the price of a bond must be below its present value for the seller to gain.

As per the law of demand, how does consumer demand for a product behave?

a) It is directly proportional to the supply of the product.

b) It is inversely related to the product’s price.

c) It is directly related to the product’s price.

d) It is inversely proportional to the supply of the product.

Option b – It is inversely related to the product’s price.

How does an increase in the interest rate affect the demand for Money?

a) Initially increases, then declines

b) Increases

c) Stays unchanged

d) Decreases

Option d – Decreases

When ex ante aggregate demand and supply are represented graphically, at what point is equilibrium achieved?

a) Where ex ante aggregate demand equals ex ante aggregate supply.

b) Where ex ante aggregate demand is zero.

c) Where ex ante aggregate demand is lower than ex ante aggregate supply.

d) Where ex ante aggregate demand exceeds ex ante aggregate supply.

Option a – Where ex ante aggregate demand equals ex ante aggregate supply.

If the price elasticity of demand is less than one, the demand for goods is termed as

a) Inelastic

b) Perfectly inelastic

c) Unitary elastic

d) Perfectly elastic

Option a – Inelastic

In which situations can both the demand curve and supply curve shift simultaneously?

a) Demand curve shifts rightward while supply curve shifts leftward.

b) Both demand and supply curves shift leftward.

c) Demand curve shifts leftward while supply curve shifts rightward.

d) All of the above.

Option d – All of the above.

Which assumptions are made while calculating aggregate demand for final goods in an Economy?

a) Prices of final goods and interest rates remain constant in the short run.

b) Aggregate supply is assumed to be perfectly elastic.

c) Only statement I is correct.

d) Both statements I and II are correct.

Option d – Both statements I and II are correct.

The demand for Money arises primarily due to uncertainty about future Income and expenditure. This is known as

a) Transaction motive

b) Speculative motive

c) Precautionary motive

d) Generic motive

Option c – Precautionary motive

Which of the following is true for a perfectly competitive market? I. The market has a large number of buyers and sellers. II. Perfect information exists in the market.

a) Only statement I is correct.

b) Neither I nor II is correct.

c) Both I and II are correct.

d) Only statement II is correct.

Option c – Both I and II are correct.

Commercialisation of Agriculture indicates

a) Surplus Income

b) Surplus for producers

c) Marketable surplus

d) Consumer surplus

Option c – Marketable surplus

If the MPC = 0.8, what will be the value of the government expenditure multiplier for the function Y = C + I + G?

a) 0.2

b) 5

c) 2.25

d) 0.4

Option b – 5

Which of the following is correct regarding marginal utility? I. It refers to the change in total utility from consuming an additional unit of a commodity. II. It decreases as more units of the commodity are consumed.

a) Both statements I and II are correct.

b) Only statement II is correct.

c) Neither I nor II is correct.

d) Only statement I is correct.

Option a – Both statements I and II are correct.

For the consumption function of country X: C = 100 + 0.8Y, what are the values of autonomous consumption (A) and marginal propensity to consume (MPC)?

a) A = 0.8, MPC = 100

b) A = 100, MPC = 80

c) A = 80, MPC = 0.10

d) A = 100, MPC = 0.8

Option d – A = 100, MPC = 0.8

A country’s balance of payments improves after devaluation if the combined elasticity of demand for exports and imports is

a) Less than one

b) Equal to one

c) Greater than one

d) Zero

Option c – Greater than one

In a consumption function, if MPC = 0.6, the marginal propensity to save (MPS) will be

a) 0.16

b) 0.36

c) -0.6

d) 0.4

Option d – 0.4

The portion of farm output that farmers sell in the market is called

a) Marketed surplus

b) Production deficit

c) Production surplus

d) Marketed deficit

Option a – Marketed surplus

Compared to monopolistic competition, the demand curve under monopoly is

a) Equally elastic

b) Less elastic

c) More elastic

d) Perfectly elastic

Option b – Less elastic

If the demand for a product decreases, what is likely to happen to its equilibrium price?

a) Fall

b) Neither rise nor fall

c) Rise first, then fall sharply

d) Rise

Option a – Fall

Which type of exchange rate is SET purely by demand and supply conditions in the market?

a) Floating exchange rate

b) Fixed exchange rate

c) Soft pegged exchange rate

d) Hard pegged exchange rate

Option a – Floating exchange rate

What condition reflects market equilibrium?

a) Demand equals supply

b) No surplus exists in the market

c) Both a and b

d) Neither a nor b

Option c – Both a and b

The relationship between competitive behaviour and competitive market structure is

a) Direct

b) Inverse

c) Proportional

d) Not related

Option b – Inverse

The price elasticity of demand for a specific good is determined by 1. Whether the good is a necessity or luxury 2. Availability of substitutes 3. Growth rate of Income in the Economy 4. The share of the good in a consumer’s budget

a) 1 and 4 only

b) 1, 2 and 3

c) 3 and 4

d) 1, 2 and 4

Option d – 1, 2 and 4

Which of the following causes movement along the demand curve of a product?

a) Change in the product’s own price

b) Change in the prices of other products

c) Change in consumer Income

d) Change in consumer tastes and preferences

Option a – Change in the product’s own price

Which of the following best illustrates monopolistic competition?

a) Retail vegetable markets

b) Soap industry

c) Indian Railways

d) Software engineers’ labour market

Option b – Soap industry

Which factor does not affect the quantity demanded of a good?

a) The good’s own price

b) Price of a complementary item

c) Price of a substitute item

d) Cost of inputs used in production

Option d – Cost of inputs used in production

Holding other factors constant, supply of a product rises when 1. Its market price increases 2. Production costs fall 3. Prices of other goods decline

a) 1 and 3 only

b) 1 and 2 only

c) 2 and 3 only

d) 1, 2 and 3

Option d – 1, 2 and 3

Under a normal downward-sloping demand curve with a perfectly elastic supply curve, a fall in demand will lead to

a) Higher equilibrium price and quantity

b) Lower equilibrium price and quantity

c) Lower quantity with unchanged price

d) Higher price with unchanged quantity

Option c – Lower quantity with unchanged price

Which statement about a firm’s equilibrium under perfect competition is incorrect?

a) Price must be at least equal to average variable cost in the short run

b) Price must equal marginal cost

c) Price must equal average cost in the long run

d) Marginal cost decreases at equilibrium output

Option d – Marginal cost decreases at equilibrium output

In an Economy with only two normal goods, X and Y, if the price of X rises, what happens?

a) Demand for X falls while demand for Y is uncertain

b) Demand for both X and Y falls

c) Demand for X rises while demand for Y is uncertain

d) Demand for X rises while demand for Y falls

Option a – Demand for X falls while demand for Y is uncertain

Market demand for a product may increase if 1. Price of its substitute rises 2. Price of its complement rises 3. It is an inferior good and incomes increase 4. Its own price decreases