UPSC Indian Economy – Chapter 1: Basic Concepts and Economic Systems (24 MCQs)
UPSC Indian Economy – Chapter 1: Basic Concepts and Economic Systems (24 MCQs) – 23 questions, subject: Indian Economy. Every question has the correct answer with a one-line explanation; tap "Show Answer". Free practice for TNPSC, UPSC, SSC, Bank and RRB exams – Shanmugam IAS Academy, Coimbatore.
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The opportunity cost of a decision is best described as:
Correct Answer: D [the value of the next best alternative given up]
Explanation:
the next best alternative forgone.
A production possibility curve is concave to the origin because:
Correct Answer: B [the marginal opportunity cost rises as more of one good is produced]
Explanation:
resources are not equally suited to both goods.
A point inside the production possibility curve indicates:
Correct Answer: A [unemployment or inefficient use of resources]
Explanation:
resources are idle or wasted.
Consider the following:
1. Foreign exchange reserves
2. Fiscal deficit
3. Investment
4. Public debt
Which of the above are stock variables?
Correct Answer: D [1 and 4 only]
Explanation:
reserves and debt are measured on a date.
Macroeconomics as a separate branch is most closely associated with:
Correct Answer: C [J.M. Keynes, The General Theory of Employment, Interest and Money]
Explanation:
1936; aggregate demand and employment.
A fall in the price of tea, other things remaining the same, will most likely:
Correct Answer: A [cause a movement along the demand curve for tea]
Explanation:
own-price change = movement along the curve.
A good whose quantity demanded rises when its price rises because it is an inferior staple of very poor households is a:
Correct Answer: D [Giffen good]
Explanation:
the income effect outweighs the substitution effect.
The price of a good rises from Rs 40 to Rs 50 and quantity demanded falls from 100 to 80 units. Using the initial values as the base, the price elasticity of demand is:
Correct Answer: A [−0.8, inelastic]
Explanation:
(−20%) ÷ (+25%) = −0.8.
A good with a negative income elasticity of demand is:
Correct Answer: C [an inferior good]
Explanation:
demand falls as income rises.
A government wants to raise tax revenue with the least fall in consumption. It should tax goods whose demand is:
Correct Answer: B [inelastic]
Explanation:
quantity hardly falls, so revenue rises.
Consider the following statements about a pure public good:
1. One person's consumption does not reduce the amount available to others.
2. It is difficult to exclude those who do not pay.
3. It must be produced by a government department.
Which of the statements given above are correct?
Correct Answer: A [1 and 2 only]
Explanation:
non-rival and non-excludable.
Universal immunisation is a classic example of a good that has:
Correct Answer: C [a positive externality]
Explanation:
it protects people who are not vaccinated too.
Which market structure has a few interdependent sellers?
Correct Answer: D [Oligopoly]
Explanation:
each firm watches its rivals.
Appeals against orders of the Competition Commission of India lie to the:
Correct Answer: C [National Company Law Appellate Tribunal]
Explanation:
under the Competition Act, 2002, as amended.
Assertion (A): Private markets tend to under-supply public goods.
Reason (R): People can enjoy public goods without paying for them.
Correct Answer: B [Both A and R are true, and R is the correct explanation of A]
Explanation:
the free-rider problem.
Arrange the following in chronological order:
1. Industrial Policy Resolution with three schedules of industries
2. Avadi session adopting the "socialistic pattern of society"
3. First Five-Year Plan
4. Monopolies and Restrictive Trade Practices Act
Select the correct order:
Correct Answer: C [3–2–1–4]
Explanation:
1951, 1955, 1956, 1969.
In a mixed economy:
Correct Answer: A [both the private and the public sectors own means of production, and the State guides the market]
Explanation:
India's model since 1948.
Match the activity with its sector:
1. Cold storage of potatoes – A. Primary
2. Mineral exploration – B. Secondary
3. Weaving cloth – C. Tertiary
Correct Answer: D [1-C, 2-A, 3-B]
Explanation:
service, mining, manufacturing.
According to the Provisional Estimates of 2025-26 released on 5 June 2026, the sector with the largest share of India's gross value added at current prices was:
Correct Answer: B [services (tertiary sector)]
Explanation:
about 54 per cent.
With reference to the sectors of the Indian economy, consider the following pairs:
1. Storage of agricultural produce – Secondary
2. Dairy farm – Primary
3. Mineral exploration – Tertiary
4. Weaving cloth – Secondary
How many of the pairs given above are correctly matched?
Correct Answer: B [Only two]
Explanation:
pairs 2 and 4; storage is tertiary and mineral exploration is primary.
Which of the following activities constitute a real sector in the economy?
1. Farmers harvesting their crops
2. Textile mills converting raw cotton into fabrics
3. A commercial bank lending money to a trading company
4. A corporate body issuing Rupee Denominated Bonds overseas
Select the correct answer using the code given below:
Correct Answer: A [1 and 2 only]
Explanation:
harvesting and manufacturing produce goods; this is the real (production) sector.
Other things remaining unchanged, market demand for a good might increase if
1. price of its substitute increases
2. price of its complement increases
3. the good is an inferior good and income of the consumers increases
4. its price falls
Which of the above statements are correct?
Correct Answer: A [1 and 4 only]
Explanation:
a dearer substitute raises demand for the good, and a lower own price raises the quantity demanded.
If a commodity is provided free to the public by the Government, then
Correct Answer: C [the opportunity cost is transferred from the consumers of the product to the tax-paying public.]
Explanation:
taxpayers bear the cost of what the tax money could otherwise have funded.
➤ Full notes, maps, tables, a reason for every option and Mains PYQs – U15 · Indian Economy (UPSC book, ₹249): www.shanmugamiasacademy.in/study-materials/upsc-indian-economy
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