# Engineering Economics Questions and Answers

1. Zero substitutability between the inputs is assumed by
(a) Input-output Isoquant
(b) Convex Isoquant
(c) Kinked Isoquant
(d) Concave Isoquant

2. If the Cobb-Douglas function is of the form X=2L2K, then what is MPL at L=10 and K=20?
(a) 1000
(b) 800
(c) 1200
(d) 600

3. If price is Rs.10 and supply is 20 and if price increases by Rs.2 as a result of which supply increases by 5, then elasticity of supply is
(a) 1
(b) 1.25
(c) 1.5
(d) 1.75

4. The difference between GNPFC and GDPFC is equal to
(a) Net Factor Income From Abroad
(b) Export-Import
(c) Net Foreign Direct Investment
(d) Net Indirect Tax

5. If C = 500 + 0.8Y, then what is the national income at I = 500?
(a) 4000
(b) 4500
(c) 4750
(d) 5000

6. IS-LM theory is
(a) Opposed to Keynes and Classical theory
(b) Synthesis to Keynes and Classical theory
(c) Closer to Keynes theory
(d) Closer to Classical theory

7. Investment curve is downward sloping because of decrease in
(a) Marginal efficiency of capital
(b) Marginal productivity of capital
(c) High capital output ratio
(d) None of these

8. A situation where the amount spent by consumers on commodity is constant when price changes is known as:
(a) equilibrium
(b) perfect elasticity
(c) unitary elasticity
(d) backward sloping demand

9. The substitution effect works to encourage a consumer to purchase more of a product when the price of the goods is falling because
(a) other products are now less expensive than before
(b) the product is now relatively less expensive than before
(c) the consumer’s real income has increased
(d) the consumer’s real income has decreased

10. When average product increases, the marginal product is
(a) less than the average product
(b) equal to the average product
(c) more than the average product
(d) none of these

11. Consider the following statements about an isoquant
1. it slopes downwards to the right
2. it is convex
3. two isoquants can never intersect each other
Which of the above statements is/are correct?
(a) 1 alone
(b) 1 and 2
(c) 1 and 3
(d) 1, 2 and 3

12. If an individual seller in a perfectly competitive market wishes to double his sales, he would
(a) simply offer double the quantity for sale
(b) improve the quality of his product
(c) lower his price to half
(d) advertise the superiority of his product

13. In Cournot’s duopoly model there are two firms operating with
(a) marginal cost
(b) zero cost
(c) average cost
(d) fixed cost

14. If the citizens of a country are earning more from abroad than foreigners are earning in that country then
(a) GNP exceeds GDP
(b) GDP exceeds GNP
(c) GDP becomes equal to GNP
(d) None of these

15. According to the Keynes’ Psychological Law of Consumption, while increase in income is accompanied by increase in consumption, yet the rate of increase in consumption is __________ the rate of increase in income.
(a) invariably more than
(b) often less than
(c) invariably less than
(d) equal to

16. Intersection of the saving and investment schedule will give the
(a) money rate of interest
(b) market rate of interest
(c) real rate of interest
(d) natural rate of interest

17. Analysis of government decision on welfare aspect is
(a) Positive Economics
(b) Normative Economics
(c) Analytical Economics
(d) Applied Economics

18. Prof. Ragnar Nurkse defined underdevelopment in terms of
(a) Scarcity of natural resources
(b) Scarcity of human resources
(c) Scarcity of technology
(d) Scarcity of capital

19. According to Milton Friedman, people hold money with them
(a) because of speculative motive
(b) to give marginal utility by holding money
(c) because of irrational behavior
(d) none of these

20. Cess is tax for
(a) Specific purpose
(c) Fine & fees
(d) Profit

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21. Enhanced structural adjustment facility is provided by
(b) IMF
(c) EIB
(d) WTO

(a) Cost push inflation
(b) Demand Pull inflation
(c) Both (a) and (b)
(d) Expansionary pressure

23. Fund which has to be invested in government bonds is called
(a) Investment ratio
(b) Cash reserve ratio
(c) Statutory liquidity ratio
(d) Credit ratio

24. Economic Liberalisation in India started with
(a) Doing away with procedural formalities for foreign direct investment
(b) Significant reduction in tax rates
(c) The convertibility of Indian Rupee
(d) Substantial changes in industrial licensing policy

25. Post Office Saving Deposit is part of
(a) M1
(b) M2
(c) M3
(d) M4

26. Which of the following pairs is not correctly matched?
(a) Division of labour : Adam Smith
(b) Population growth : T.R.Malthus
(c) Golden age : Joan Robinson
(d) Critical Minimum effort : J.E.Meade

27. Solow’s model of long run growth is an improvement over that of
(b) Harrod – Domar
(c) Joan Robinson
(d) David Ricardo

28. Sectors which are included in infrastructure are
(a) transportation
(b) communication
(c) energy
(d) all of these

29. To raise productivity in agriculture it is necessary that
(a) productive tariffs are imposed
(b) better inputs are made available to agriculturists
(c) bank rate is lowered
(d) less money is spent on industrial expansion

30. Which form of money has the highest degree of liquidity?
(a) M1
(b) M2
(c) M3
(d) M4

31. Consider the following:
(i) Power to issue notes
(ii) To act as banker’s bank
(iii) To act as a bank to the government
(iv) To act as a bank to the public
Which of the above are functions of the central bank?
(a) i and ii
(b) i, ii and iv
(c) i, ii and iii
(d) i, ii, iii and iv

32. Which of the following budgeting systems includes the decisions to spend a particular set of resources for a particular purpose and involves laying down the sequence of steps for executing the project?
(a) Programme budgeting
(b) Performance budgeting
(c) Comparison budgeting
(d) Economic budgeting

33. A pure public good is subject to
(a) the law of increasing costs
(b) the law of constant costs
(c) the law of decreasing costs
(d) none of these

34. The term ‘Hindu rate of growth’ was conceptualised by
(a) V.K.R.V.Rao
(b) M.N.Roy
(c) K.N.Raj
(d) A.K.Sen

35. Other things being equal, a fall in price of a commodity results in a/an –
(a) decrease in investment
(b) increase in quantity supplied
(c) increase in quantity demanded
(d) decrease in quantity demanded

36. Firms where there is co-existence of large number of buyers and sellers alongside differentiate products is called
(a) Perfect Competition
(b) Monopolistic Competition
(c) Duopoly
(d) Oligopoly

37. Many a time we read in the newspapers about the “Doha Round “ of talks. It is related to the talks of which of the following organizations?
(a) European Union
(c) G – 8
(d) None of these

38. Ad Valorem tax is a tax levied:
(a) According to value
(b) According to weight
(c) According to size

39. The basis of determining dearness allowance (DA) to employees in India is
(a) National Income
(b) Consumer Price Index
(c) Per Capita Income
(d) GDP at factor cost

40. Which of the following Agency regulates the working of the share markets in India –
(a) MRTP Act
(b) FERA
(c) SEBI
(d) FEMA

41. ‘Zero Based Budgeting’ means-
(a) Infinite deficit financing
(b) Preparation of new budget every time
(c) No Appraisal of new programmes
(d) No curtailment in unproductive expenditure

42. Which article of the Indian constitution contains the central budget?
(a) Article 110
(b) Article 111
(c) Article 112
(d) Article 202

43. Who are very senior citizens in the context of collection of income tax in India?
(a) Above the age of 60
(b) Above the age of 65
(c) Above the age of 70
(d) Above the age of 80

44. What is the agency responsible for publishing National income in India?
(a) National Sample Survey
(b) SEBI
(c) Central Statistics Organisation
(d) TRAI

45. When inflation goes out of control and the rate of inflation is more than 100 %, what is it called?
(a) Reflation
(b) Running inflation
(c) Stagflation
(d) Hyper-inflation