ECO401 Final Term MCQs 2026 by VUBuddy

Q1. Suppose the marginal physical product of labor equals Rs. 1500. If the price of good that workers produce is

1. Rs. 75000
2. Rs. 3500
3. Rs. 7500
4. Rs. 3300

Correct answer: Rs. 7500

Q2. Monopolist earns supernormal profit and can invest their supernormal profits in:

1. Development of new innovative products
2. Research and development
3. Sustain a price war into new foreign market
4. All of the given options are true

Correct answer: All of the given options are true

Q3. Which of the followings describe agents?

1. All of the given options are true
2. Individual laborer
3. Individual firm
4. Individual consumer

Correct answer: All of the given options are true

Q4. If total revenue of a firm is Rs. 52000 and total cost is Rs. 43500, then firm will bear profit/loss equal to:

1. Rs. 8500
2. Rs. 25000
3. Rs. 18500
4. Rs. 1000

Correct answer: Rs. 8500

Q5. Panasonic Corporation is a leading Japanese multinational electronics corporation. It maximizes its profit

1. Marginal Cost = Marginal Revenue.
2. Marginal Cost > Marginal Revenue.
3. Marginal Cost = Average Revenue.
4. Marginal Cost < Marginal Revenue.

Correct answer: Marginal Cost = Marginal Revenue.

Q6. A lighthouse is a classic example of a:

1. Public good.
2. Merit good.
3. Private good.
4. Common-pool resource.

Correct answer: Public good.

Q7. What characterizes information products in economics?

1. They are always excludable.
2. They have physical attributes.
3. They are produced by traditional manufacturing processes.
4. They are intangible and non-rivalrous in consumption.

Correct answer: They are intangible and non-rivalrous in consumption.

Q8. Consumption spending, investment expenditures, government expenditures and net exports are the components of:

1. Aggregate demand.
2. Government revenue.
3. Aggregate supply.
4. Household income.

Correct answer: Aggregate demand.

Q9. According to classical economists, what was the main reason of fall in investment during great depression?

1. Low interest rate
2. High interest rate
3. Fall in consumption expenditures
4. Large government expenditures

Correct answer: High interest rate

Q10. Which of the following markets is most likely to be oligopolistic?

1. The market for vegetables.
2. The market for clothing.
3. The market for aluminum.
4. The market for wheat.

Correct answer: The market for aluminum.

Q1. If the monopolist faces loss then government can regulate this situation through:

1. Both taxes and subsidies
2. Subsidies
3. None of the given options is true
4. Taxes

Correct answer: Subsidies

Q2. Public goods are characterized by which two key attributes?

1. Non-rivalry and non-excludability
2. Rivalry and non-excludability
3. Non-rivalry and excludability
4. Rivalry and excludability

Correct answer: Non-rivalry and non-excludability

Q3. Profit is maximized when:

1. Marginal revenue product is greater than marginal input cost.
2. Marginal revenue product equals marginal input cost.
3. Marginal revenue product is less than marginal input cost.
4. Marginal input cost is zero.

Correct answer: Marginal revenue product equals marginal input cost.

Q4. According to Classical economists, economy always remains:

1. Above full employment level.
2. At full employment level.
3. Stagnant.
4. Below full employment level.

Correct answer: At full employment level.

Q5. What was the primary policy recommendation by Keynesians to address the Great Depression?

1. Implementing high-interest rates to control inflation.
2. Reducing taxes to stimulate consumer spending.
3. Increasing government spending to create jobs and boost demand.
4. Reducing government spending to balance the budget.

Correct answer: Increasing government spending to create jobs and boost demand.

Q6. According to Keynesian economics, what was the primary driver of economic downturns such as the Great Depression?

1. Overproduction and excess supply in the market.
2. Government intervention and regulation.
3. Lack of consumer spending and effective demand.
4. A surplus of available jobs in the labor market.

Correct answer: Lack of consumer spending and effective demand.