Top 80+ Solved Public Economics MCQ Questions Answer
Q. Which of the following describes the situation where all taxes and other revenues are less than expenditures during a given period?
a. Budget Deficit.
b. Budget Surplus.
c. Balanced Budget.
d. Public Debt.
Q. The Fundamental Theorem of Welfare Economics:
a. Shows that the allocation of resources generated by a complete system of perfectly competitive markets results in all consumers attaining the same utility level.
b. Refers to the biblical observation that "the poor ye shall always have with you."
c. Implies that no intervention in the workings of markets can be justified on efficiency grounds.
d. Holds that the allocation of resources generated by a complete system of perfectly competitive markets is Pareto efficient.
Q. If the economy is in an inflationary period, what action would Fiscal Policy most likely take?
a. Decrease the discount rate.
b. Increase taxes.
c. Decrease taxes.
d. Increase spending.
Q. Public goods are difficult for a private market to provide due to:
a. The free-rider problem.
b. The Tragedy of the Commons.
c. The public goods problem.
d. The rivalness problem.
Q. Merit goods are those which, when consumed, generate positive external benefits. This is likely to mean that, in a free market economy, the good will be:
a. Over-consumed.
b. Over-supplied.
c. Subject to VAT.
d. Under-supplie
Q. The optimum level of economic activity and associated pollution from society's point of view occurs where:
a. Marginal private benefit = Marginal private cost.
b. Marginal social benefit < Marginal social cost.
c. Marginal social benefit= Marginal social cost.
d. Marginal social benefit> Marginal social cost.
Q. If pollution by one firm results in higher production costs for another firm, this would be classified as a:
a. Negative production externality.
b. Negative consumption externality.
c. Marginal private cost of production.
d. Free Goo
Q. In the case of a negative externality, the social marginal cost will:
a. Be equal to private marginal cost.
b. Exceed the private marginal cost
c. Fall short of private marginal cost.
d. Bear no significant relation to private marginal cost.
Q. Printing of new currency notes and RBI borrowings by government is called:
a. Government Loans.
b. Government Securities.
c. Government Bonds.
d. Deficit Financing.
Q. Which of the following is not a characteristic of a tax?
a. It is a compulsory payment.
b. Every tax involves a sacrifice by tax payer.
c. There is a quid-pro-quo between the tax payer and the Government.
d. Refusal to pay tax is a punishable offence.
Q. Which of the following is not the broad component of Property Rights?
a. The right to use the good.
b. The right not to transfer the good to others.
c. The right to earn income from the good.
d. The right to enforce property rights.
Q. When property rights are settled by means of bargaining or negotiating terms, what has been applied?
a. A good deal.
b. A bad deal.
c. Cloud theorem.
d. Coase theorem.
Q. Following are some of examples of Transfer Expenditure EXCEPT:
a. Interest payments on public debt.
b. Social infrastructure such as education, health and family welfare.
c. Unemployment allowances.
d. Subsidies.
Q. All other things being equal, a substantial cut in the rate of income tax in the short run is most likely to reduce:
a. The government budget deficit.
b. Spending on imports.
c. Unemployment.
d. Inflation.
Q. Which of the following is NOT the effect of taxation on production?
a. Effects on the distribution of income and wealth.
b. Effects on the ability to work, save and invest.
c. Effects on the will to work, save and invest.
d. Effects on the allocation of resources.