About this quiz
50 questions covering every section of the note.
This Lok Sewa practice set has 50 multiple-choice questions (Subject: Economics and Planning · For: Kharidar, Nayab Subba, Section Officer · Level: Easy). Take the quiz above first; after that, use the study list below to revise every question with its correct answer and a short explanation.
Study list: all 50 questions with answers and explanations
Who is known as the father of economics?
- A) Alfred Marshall
- B) Adam Smith ✔
- C) J. M. Keynes
- D) Lionel Robbins
Why: Adam Smith is called the father of economics for his book The Wealth of Nations.
The Wealth of Nations was published in:
- A) 1776 ✔
- B) 1890
- C) 1932
- D) 1936
Why: Adam Smith published The Wealth of Nations in 1776.
The welfare definition of economics was given by:
- A) Adam Smith
- B) Lionel Robbins
- C) Alfred Marshall ✔
- D) Paul Samuelson
Why: Alfred Marshall gave the welfare definition: economics studies how people earn and use income for material welfare.
The scarcity definition of economics was given by:
- A) Lionel Robbins ✔
- B) Adam Smith
- C) Keynes
- D) Marshall
Why: Lionel Robbins defined economics as the study of choices made with scarce means that have alternative uses.
The value of the next best alternative given up is called:
- A) Marginal cost
- B) Opportunity cost ✔
- C) Fixed cost
- D) Sunk cost
Why: Opportunity cost is the value of the next best alternative given up when making a choice.
Who is called the father of modern macroeconomics?
- A) Ragnar Frisch
- B) J. M. Keynes ✔
- C) Adam Smith
- D) Milton Friedman
Why: J. M. Keynes is called the father of modern macroeconomics for his General Theory (1936).
The study of national income and inflation belongs to:
- A) Microeconomics
- B) Macroeconomics ✔
- C) Welfare economics
- D) Price theory
Why: National income, inflation and unemployment are studied in macroeconomics.
According to the law of demand, when price rises:
- A) Quantity demanded rises
- B) Quantity demanded falls ✔
- C) Demand stays the same
- D) Supply falls
Why: By the law of demand, when price rises, quantity demanded falls, other things being equal.
The demand curve normally slopes:
- A) Upward
- B) Downward ✔
- C) Vertically
- D) Horizontally
Why: The demand curve normally slopes downward from left to right.
The supply curve normally slopes:
- A) Downward
- B) Upward ✔
- C) Horizontally
- D) In a circle
Why: The supply curve normally slopes upward, because higher prices encourage more supply.
The price at which demand equals supply is called:
- A) Equilibrium price ✔
- B) Maximum price
- C) Support price
- D) Shadow price
Why: The equilibrium price is where quantity demanded equals quantity supplied.
The reward for land as a factor of production is:
- A) Wage
- B) Interest
- C) Rent ✔
- D) Profit
Why: The reward for land is rent.
The reward for capital is:
- A) Profit
- B) Interest ✔
- C) Wage
- D) Rent
Why: The reward for capital is interest.
The entrepreneur who bears risk earns:
- A) Rent
- B) Wage
- C) Profit ✔
- D) Interest
Why: The entrepreneur who bears risk earns profit.
A market with only one seller is called:
- A) Oligopoly
- B) Duopoly
- C) Monopoly ✔
- D) Perfect competition
Why: A market with only one seller is a monopoly.
A market with a few large sellers is called:
- A) Oligopoly ✔
- B) Monopoly
- C) Perfect competition
- D) Monopsony
Why: A market with a few large sellers is an oligopoly.
In perfect competition, firms are:
- A) Price makers
- B) Price takers ✔
- C) Monopolists
- D) Government owned
Why: In perfect competition, each firm is too small to affect price, so firms are price takers.
Each additional unit consumed gives less satisfaction. This is the law of:
- A) Demand
- B) Supply
- C) Diminishing marginal utility ✔
- D) Returns to scale
Why: The law of diminishing marginal utility says each extra unit gives less additional satisfaction.
What type of economy does Nepal have?
- A) Purely capitalist
- B) Purely socialist
- C) Mixed economy ✔
- D) Barter economy
Why: Nepal has a mixed economy: both the government and the private sector play roles.
The basic economic problem is:
- A) Inflation
- B) Scarcity ✔
- C) Taxation
- D) Unemployment
Why: Scarcity, unlimited wants and limited resources, is the basic economic problem.
The "father of economics" is:
- A) Adam Smith ✔
- B) Karl Marx
- C) J. M. Keynes
- D) Alfred Marshall
Why: Adam Smith is known as the father of economics.
Adam Smith's famous book is:
- A) The Wealth of Nations ✔
- B) Das Kapital
- C) The General Theory
- D) Principles of Economics
Why: Adam Smith's famous book is The Wealth of Nations.
Economics as the study of "scarcity and choice" was defined by:
- A) Lionel Robbins ✔
- B) Adam Smith
- C) Alfred Marshall
- D) Paul Samuelson
Why: Lionel Robbins defined economics as the study of scarcity and choice.
The study of individual units like a consumer or a firm is:
- A) Microeconomics ✔
- B) Macroeconomics
- C) Econometrics
- D) Public finance
Why: Microeconomics studies individual units such as consumers and firms.
The study of the whole economy, like national income and inflation, is:
- A) Macroeconomics ✔
- B) Microeconomics
- C) Accounting
- D) Statistics
Why: Macroeconomics studies the whole economy, such as national income and inflation.
The value of the next best alternative given up is:
- A) Opportunity cost ✔
- B) Fixed cost
- C) Sunk cost
- D) Marginal revenue
Why: Opportunity cost is the value of the next best alternative given up.
The law of demand says that, other things equal, when price rises, quantity demanded:
- A) Falls ✔
- B) Rises
- C) Stays the same
- D) Doubles
Why: Other things equal, quantity demanded falls when price rises.
The demand curve usually slopes:
- A) Downward from left to right ✔
- B) Upward from left to right
- C) Vertical
- D) Horizontal
Why: The demand curve usually slopes downward from left to right.
The law of supply says that when price rises, quantity supplied:
- A) Rises ✔
- B) Falls
- C) Stays the same
- D) Becomes zero
Why: By the law of supply, quantity supplied rises when price rises.
The price at which quantity demanded equals quantity supplied is the:
- A) Equilibrium price ✔
- B) Ceiling price
- C) Floor price
- D) Cost price
Why: The equilibrium price is where quantity demanded equals quantity supplied.
When quantity supplied is more than quantity demanded, there is a:
- A) Surplus ✔
- B) Shortage
- C) Equilibrium
- D) Monopoly
Why: When supply is more than demand at a price, there is a surplus.
When quantity demanded is more than quantity supplied, there is a:
- A) Shortage ✔
- B) Surplus
- C) Deflation
- D) Equilibrium
Why: When demand is more than supply at a price, there is a shortage.
Goods used together, like tea and sugar, are:
- A) Complementary goods ✔
- B) Substitute goods
- C) Inferior goods
- D) Giffen goods
Why: Goods used together, like tea and sugar, are complementary goods.
Goods that can replace each other, like tea and coffee, are:
- A) Substitute goods ✔
- B) Complementary goods
- C) Capital goods
- D) Public goods
Why: Goods that can replace each other, like tea and coffee, are substitutes.
A good whose demand falls when income rises is an:
- A) Inferior good ✔
- B) Normal good
- C) Luxury good
- D) Public good
Why: An inferior good's demand falls when income rises, as people switch to better goods.
A market with only one seller is:
- A) Monopoly ✔
- B) Duopoly
- C) Oligopoly
- D) Perfect competition
Why: A market with only one seller is a monopoly.
A market with a few large sellers is:
- A) Oligopoly ✔
- B) Monopoly
- C) Perfect competition
- D) Monopsony
Why: A market with a few large sellers is an oligopoly.
A market with only one buyer is:
- A) Monopsony ✔
- B) Monopoly
- C) Duopoly
- D) Oligopoly
Why: A market with only one buyer is a monopsony.
In perfect competition, firms sell:
- A) Identical (homogeneous) products ✔
- B) Unique branded products
- C) Only services
- D) Only to the government
Why: In perfect competition, firms sell identical (homogeneous) products.
Many sellers with slightly different (branded) products is:
- A) Monopolistic competition ✔
- B) Perfect competition
- C) Monopoly
- D) Oligopoly
Why: Monopolistic competition has many sellers with slightly different, branded products.
The four factors of production are land, labour, capital and:
- A) Organisation (entrepreneurship) ✔
- B) Money
- C) Market
- D) Government
Why: The four factors of production are land, labour, capital and organisation (entrepreneurship).
The reward for land is:
- A) Rent ✔
- B) Wages
- C) Interest
- D) Profit
Why: The reward for land is rent.
The reward for the entrepreneur is:
- A) Profit ✔
- B) Rent
- C) Wages
- D) Interest
Why: The entrepreneur's reward is profit.
The extra satisfaction from one more unit of a good is:
- A) Marginal utility ✔
- B) Total utility
- C) Average cost
- D) Marginal cost
Why: Marginal utility is the extra satisfaction from one more unit.
As a person consumes more units of a good, marginal utility generally:
- A) Decreases ✔
- B) Increases
- C) Stays constant
- D) Becomes infinite
Why: As consumption rises, marginal utility generally decreases.
Demand that changes a lot with a small price change is:
- A) Elastic demand ✔
- B) Inelastic demand
- C) Fixed demand
- D) Joint demand
Why: Elastic demand changes a lot when price changes a little.
Demand for essential goods like salt is usually:
- A) Inelastic ✔
- B) Highly elastic
- C) Perfectly elastic
- D) Zero
Why: Demand for essentials like salt is inelastic: people buy similar amounts whatever the price.
A general and continuous rise in prices is:
- A) Inflation ✔
- B) Deflation
- C) Recession
- D) Devaluation
Why: Inflation is a general and continuous rise in prices.
The total value of final goods and services produced within a country in a year is:
- A) GDP ✔
- B) GNP
- C) Per capita income
- D) Budget
Why: GDP is the total value of final goods and services produced within a country in a year.
An economy where both the government and the private sector play roles is a:
- A) Mixed economy ✔
- B) Command economy
- C) Pure capitalist economy
- D) Barter economy
Why: A mixed economy combines government and private sector roles.