CHAPTER 8: BUILDING BLOCKS IN ECONOMICS: THE PROBLEM OF CHOICE
50 MULTIPLE CHOICE QUESTIONS (MCQs)
1. What does economics primarily deal with?
(A) Studying only the history of countries
(B) Managing only government offices
(C) Making choices about using limited resources to satisfy needs and wants
(D) Producing unlimited resources
Answer: (C) Making choices about using limited resources to satisfy needs and wants
2. Which of the following is an example of a human need?
(A) Food
(B) A luxury car
(C) An expensive watch
(D) A holiday abroad
Answer: (A) Food
3. Which of the following is generally classified as a want?
(A) Drinking water
(B) Basic food
(C) Essential shelter
(D) A luxury gadget
Answer: (D) A luxury gadget
4. Why can all human wants not be satisfied?
(A) Human wants never change
(B) Resources are limited while human wants are unlimited
(C) Resources are always unlimited
(D) People do not have any needs
Answer: (B) Resources are limited while human wants are unlimited
5. What are resources?
(A) Only money kept in a bank
(B) Only natural materials used for construction
(C) Factors used for the production of goods and services
(D) Only finished goods available in shops
Answer: (C) Factors used for the production of goods and services
6. Which of the following is an example of a natural resource?
(A) Water
(B) A factory machine
(C) A computer
(D) A bank account
Answer: (A) Water
7. What is opportunity cost?
(A) The total money earned from a business
(B) The price of every product in a market
(C) The cost of producing all available goods
(D) The value of the next-best alternative given up when making a choice
Answer: (D) The value of the next-best alternative given up when making a choice
8. A student has ₹100 and chooses to buy a notebook instead of saving the money for a tennis racket. Which concept explains the value of the alternative given up?
(A) Inflation
(B) Opportunity cost
(C) Market demand
(D) Public goods
Answer: (B) Opportunity cost
9. What does the Production Possibility Curve (PPC) show?
(A) The demand for a product at different prices
(B) The income earned by every household
(C) Different combinations of goods that can be produced using available resources
(D) The amount of tax collected by the government
Answer: (C) Different combinations of goods that can be produced using available resources
10. According to the table on page 185, how much wheat can the farmer produce at combination A?
(A) 100 kg
(B) 90 kg
(C) 70 kg
(D) 40 kg
Answer: (A) 100 kg
11. According to the PPC table on page 185, how much barley and wheat are produced at combination C?
(A) 25 kg barley and 90 kg wheat
(B) 75 kg barley and 40 kg wheat
(C) 100 kg barley and 0 kg wheat
(D) 50 kg barley and 70 kg wheat
Answer: (D) 50 kg barley and 70 kg wheat
12. According to the PPC table on page 185, what happens when production moves from combination A to combination E?
(A) Both barley and wheat production increase
(B) Barley production increases while wheat production decreases
(C) Wheat production increases while barley production decreases
(D) Production of both crops remains unchanged
Answer: (B) Barley production increases while wheat production decreases
13. Why does producing more barley require sacrificing some wheat in the chapter’s example?
(A) The farmer has unlimited land and labour
(B) Wheat cannot be grown on farmland
(C) Land, water, and labour are limited resources
(D) Barley does not require any resources
Answer: (C) Land, water, and labour are limited resources
14. What do points on the PPC represent in the chapter’s explanation?
(A) Maximum combinations of output achievable through efficient use of available resources
(B) Combinations that always involve wastage
(C) Goods that consumers do not want
(D) Products that cannot be manufactured
Answer: (A) Maximum combinations of output achievable through efficient use of available resources
15. What is the origin of the word “Economics” explained in the chapter?
(A) A Latin word meaning trade
(B) A Sanskrit word meaning money
(C) A French word meaning production
(D) The Greek word “oikonomia”, associated with household management
Answer: (D) The Greek word “oikonomia”, associated with household management
16. Which of the following is an economic entity?
(A) Only a mountain
(B) A consumer, producer, government, or financial institution participating in economic activity
(C) Only a natural river
(D) Only a historical monument
Answer: (B) A consumer, producer, government, or financial institution participating in economic activity
17. Why are data and analysis important for economic decisions?
(A) They eliminate the need to consider alternatives
(B) They guarantee that every decision will succeed
(C) They help people understand conditions, risks, opportunities, and possible outcomes
(D) They make resources unlimited
Answer: (C) They help people understand conditions, risks, opportunities, and possible outcomes
18. Which annual document reviews India’s economic performance and is presented in Parliament before the Union Budget?
(A) Economic Survey of India
(B) A household shopping list
(C) A company’s advertisement
(D) A private business diary
Answer: (A) Economic Survey of India
19. Which ministry prepares the Economic Survey of India, according to the chapter?
(A) Ministry of Education
(B) Ministry of Agriculture
(C) Ministry of External Affairs
(D) Ministry of Finance
Answer: (D) Ministry of Finance
20. Which of the following is included in the scope of work of economists shown on page 187?
(A) Only organising sporting events
(B) Policy-making, business consulting, research and education, and finance
(C) Only manufacturing consumer goods
(D) Only managing household kitchens
Answer: (B) Policy-making, business consulting, research and education, and finance
21. How many central questions does economics seek to address because of scarcity?
(A) Two
(B) Four
(C) Three
(D) Five
Answer: (C) Three
22. Which of the following is one of the three key questions in economics?
(A) What to produce?
(B) Which colour should every product have?
(C) Which country has the largest population?
(D) Which language should every business use?
Answer: (A) What to produce?
23. The question “How to produce?” is concerned with:
(A) Who should purchase the finished product
(B) Which goods consumers prefer to buy
(C) How income should be distributed among households only
(D) The methods, resources, and technologies used in production
Answer: (D) The methods, resources, and technologies used in production
24. What does the question “For whom to produce?” examine?
(A) Only the machinery used in factories
(B) Who benefits from the goods and services produced
(C) Only the amount of land available
(D) Only the technology used in production
Answer: (B) Who benefits from the goods and services produced
25. Why might a farmer choose to grow millets and pulses instead of water-intensive crops?
(A) Millets and pulses always require unlimited water
(B) Water availability never affects agriculture
(C) These crops may save water and support soil health
(D) Water-intensive crops never earn profits
Answer: (C) These crops may save water and support soil health
26. Which of the following is an example of a labour-intensive production method?
(A) A production method that relies more on workers and less on machinery
(B) A method that uses only automated machines
(C) A method that does not use workers or technology
(D) A method that uses no factors of production
Answer: (A) A production method that relies more on workers and less on machinery
27. Which type of production method relies more on machinery and technology?
(A) Household consumption
(B) Labour-intensive production
(C) Traditional barter
(D) Capital-intensive production
Answer: (D) Capital-intensive production
28. Which of the following is a factor of production shown in Figure 8.6 on page 190?
(A) Inflation
(B) Technology
(C) Opportunity cost
(D) Market demand
Answer: (B) Technology
29. Which set correctly identifies the four factors of production shown in the chapter?
(A) Demand, supply, price, and profit
(B) Income, savings, taxes, and expenditure
(C) Land, labour, capital, and technology
(D) Needs, wants, markets, and money
Answer: (C) Land, labour, capital, and technology
30. Which factor can influence a firm’s choice between labour-intensive and capital-intensive production?
(A) The cost and availability of labour and machinery
(B) Only the owner’s favourite colour
(C) The number of holidays in a year alone
(D) The spelling of the product’s name
Answer: (A) The cost and availability of labour and machinery
31. What is an economic system?
(A) A system used only for collecting taxes
(B) A method of managing a single household’s shopping
(C) A system concerned only with producing agricultural goods
(D) A system that determines how production, consumption, distribution, and resources are organised
Answer: (D) A system that determines how production, consumption, distribution, and resources are organised
32. What characterises a planned economy?
(A) All major decisions are made only by individual consumers
(B) A central planning authority makes major economic decisions
(C) Prices and production are determined entirely by unrestricted competition
(D) The government has no role in resource allocation
Answer: (B) A central planning authority makes major economic decisions
33. Which of the following is identified as an example of a planned economy in the chapter?
(A) Japan
(B) Hong Kong
(C) North Korea
(D) The United States of America
Answer: (C) North Korea
34. What is one possible limitation of a planned economy described in the chapter?
(A) Limited competition may reduce incentives to improve quality and innovate
(B) Private ownership always becomes unlimited
(C) The government never makes production decisions
(D) All enterprises operate without regulation
Answer: (A) Limited competition may reduce incentives to improve quality and innovate
35. In a market economy, what primarily determines the allocation of resources and prices?
(A) A single central planning authority
(B) Household preferences alone, without any market interaction
(C) Government ownership of every business
(D) The forces of demand and supply
Answer: (D) The forces of demand and supply
36. What is the usual role of government in the market economy described on page 191?
(A) To control every price and production decision
(B) To maintain safety and law and order while providing public goods and infrastructure
(C) To own every factory and shop
(D) To prevent all competition between producers
Answer: (B) To maintain safety and law and order while providing public goods and infrastructure
37. Which of the following is a possible advantage of a market economy described in the chapter?
(A) No producer can introduce new products
(B) All prices are fixed permanently by the government
(C) Competition can encourage better quality, lower prices, and innovation
(D) Private ownership is completely absent
Answer: (C) Competition can encourage better quality, lower prices, and innovation
38. Which of the following is given as an example of a market economy in the chapter?
(A) Japan
(B) North Korea
(C) The former Soviet Union
(D) Cuba
Answer: (A) Japan
39. What is a mixed economy?
(A) An economy in which only the government owns resources
(B) An economy in which private ownership is completely prohibited
(C) An economy in which markets do not exist
(D) An economy in which the government and private sector both play important roles
Answer: (D) An economy in which the government and private sector both play important roles
40. Which of the following is an example of a mixed economy given in the chapter?
(A) Only the former Soviet Union
(B) India after 1991
(C) North Korea
(D) No country mentioned in the chapter
Answer: (B) India after 1991
41. Which of the following is a role of government in a mixed economy, as shown in Figure 8.8 on page 192?
(A) Preventing every form of private enterprise
(B) Eliminating all public services
(C) Consumer protection
(D) Ending fair competition
Answer: (C) Consumer protection
42. Which of the following is an example of a public good mentioned in the chapter?
(A) Streetlighting
(B) A privately owned luxury car
(C) A personal wristwatch
(D) A privately purchased television
Answer: (A) Streetlighting
43. What is a key characteristic of public goods?
(A) Only one individual can use them at a time
(B) They are always sold at high prices
(C) They are available only to wealthy consumers
(D) They can be available to people without excluding others, and one person’s use need not prevent another’s use
Answer: (D) They can be available to people without excluding others, and one person’s use need not prevent another’s use
44. Which of the following is another example of a public good listed in the chapter?
(A) A private sports car
(B) Public parks
(C) A personal smartphone
(D) A privately owned refrigerator
Answer: (B) Public parks
45. What major economic changes did India introduce in 1991, according to the chapter?
(A) It eliminated all private enterprise
(B) It banned international trade
(C) It reduced excessive regulations and encouraged private enterprise and global trade
(D) It abolished all competition
Answer: (C) It reduced excessive regulations and encouraged private enterprise and global trade
46. Which sectors are mentioned as having been dominated by the public sector in India in the decades after Independence?
(A) Banking, transport, and heavy industries
(B) Only household cooking
(C) Only private entertainment
(D) Only personal shopping
Answer: (A) Banking, transport, and heavy industries
47. Why do most modern economies have features of mixed economic systems?
(A) Pure market economies always meet every social need
(B) Pure planned economies always guarantee unlimited innovation
(C) Governments never influence economic activity
(D) Modern economies combine private economic activity with some degree of government involvement and regulation
Answer: (D) Modern economies combine private economic activity with some degree of government involvement and regulation
48. Which decision best illustrates the economic question “What to produce?”
(A) Choosing between manual labour and machines
(B) Deciding whether to produce sugarcane or millets
(C) Deciding which workers will operate a machine
(D) Selecting the technology used in a factory
Answer: (B) Deciding whether to produce sugarcane or millets
49. Which decision best illustrates the economic question “How to produce?”
(A) Deciding which consumers will buy shoes
(B) Deciding whether to manufacture shoes for students or office workers
(C) Choosing between employing more workers and using more machinery
(D) Deciding which community will purchase a product
Answer: (C) Choosing between employing more workers and using more machinery
50. Which statement best summarises the central idea of the chapter?
(A) Economics studies choices involving scarce resources, unlimited wants, and opportunity costs
(B) Economics is concerned only with money and banks
(C) All economic systems make decisions in exactly the same way
(D) Resources are unlimited and all wants can be satisfied
Answer: (A) Economics studies choices involving scarce resources, unlimited wants, and opportunity costs
20 ASSERTION–REASON QUESTIONS
Choose the correct option:
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.
1. Assertion (A): Economics deals with choices about using limited resources to satisfy human needs and wants.
Reason (R): Human wants are unlimited, while natural and human-made resources are limited.
Answer: (A)
2. Assertion (A): Opportunity cost is the value of the next-best alternative given up when a choice is made.
Reason (R): Choosing one alternative means giving up other available options.
Answer: (A)
3. Assertion (A): The Production Possibility Curve shows different combinations of goods that can be produced using available resources.
Reason (R): Resources are limited and may be used to produce different goods.
Answer: (A)
4. Assertion (A): In the chapter’s PPC example, increasing barley production from combination A to combination E also increases wheat production.
Reason (R): The farmer uses limited land, water, and labour to produce barley and wheat.
Answer: (D)
5. Assertion (A): All points on the PPC in the chapter’s example represent maximum output achievable through efficient use of available resources.
Reason (R): The PPC illustrates trade-offs between producing different goods with limited resources.
Answer: (B)
6. Assertion (A): Economic decisions should be based on reliable data and analysis rather than guesswork.
Reason (R): Data and analysis can help people understand risks, opportunities, and possible outcomes.
Answer: (A)
7. Assertion (A): The Economic Survey of India reviews the country’s economic performance during the past year.
Reason (R): It discusses sectors and issues such as agriculture, industry, services, employment, inflation, education, and health.
Answer: (A)
8. Assertion (A): Every economy must answer the questions of what to produce, how to produce, and for whom to produce.
Reason (R): Scarce resources must be allocated among competing uses to meet different needs and wants.
Answer: (A)
9. Assertion (A): The question “For whom to produce?” concerns who benefits from the goods and services produced.
Reason (R): Consumers have different needs, income levels, tastes, and lifestyles.
Answer: (B)
10. Assertion (A): Labour-intensive production uses more workers and less machinery.
Reason (R): Capital-intensive production relies more on machinery and technology and less on workers.
Answer: (B)
11. Assertion (A): The choice of production technique depends on factors such as the cost of capital, available technology, labour costs, and the nature of the product.
Reason (R): Every producer must use exactly the same production method, regardless of cost or technology.
Answer: (C)
12. Assertion (A): In a planned economy, a central planning authority makes major economic decisions.
Reason (R): The government determines important aspects of resource allocation, production, and prices.
Answer: (A)
13. Assertion (A): Limited competition in a planned economy may reduce incentives for enterprises to improve quality or innovate.
Reason (R): Planned economies generally rely on central authority and may restrict private ownership and competition.
Answer: (A)
14. Assertion (A): In a market economy, demand and supply play a major role in determining prices and resource allocation.
Reason (R): Ownership of factories, shops, land, and other resources largely rests with individuals and private companies.
Answer: (B)
15. Assertion (A): The government has no role in a market economy.
Reason (R): The government can help ensure safety, law and order, public goods, and physical infrastructure.
Answer: (D)
16. Assertion (A): A mixed economy combines features of market and planned economies.
Reason (R): In a mixed economy, the government and private sector both participate in economic decisions and activities.
Answer: (A)
17. Assertion (A): Public goods include services and facilities such as roads, parks, police services, streetlights, and basic education.
Reason (R): Public goods can benefit people without excluding others from using them, and one person’s use need not prevent others from using them.
Answer: (A)
18. Assertion (A): India’s economic reforms in 1991 encouraged private enterprise and opened the economy to global trade and investment.
Reason (R): These reforms were introduced after India faced serious economic difficulties.
Answer: (A)
19. Assertion (A): A pure planned economy or a pure market economy describes every modern economy perfectly.
Reason (R): Most modern economies combine features of market and planned systems.
Answer: (D)
20. Assertion (A): Understanding opportunity cost can improve economic decision-making.
Reason (R): Every economic choice involves giving up one alternative in favour of another.
Answer: (A)
