Q41. In economics, the "Tragedy of the Commons" refers to a situation where:
Economic Growth, Development and Sustainable Development: RAS Prelims MCQs
99 RAS Prelims MCQs on economic growth, development and sustainable development test the national income aggregates and the difference between growth and development. Nominal and real GDP, GDP and GNP, NDP, national income, per capita income and the factors that raise growth are asked as definitions and relationships, and each explanation shows how the aggregates are linked.
Practice questions based on the RPSC RAS Prelims syllabus. They follow the exam pattern but are not past-paper questions.
Showing 41–50 of 99 questions
Q42. Which of the following is a major economic cause of environmental degradation?
Explanation
Environmental degradation is often caused by market failures where the prices of goods do not reflect their true environmental costs. Specifically, the misallocation of common property resources occurs because they are often available for free. Without proper pricing or ownership, industries have no financial reason to limit pollution or resource use. This leads to excessive consumption and the gradual destruction of the natural environment.
Q43. Consider the following statements regarding the economic linkages of environmental degradation:
I. Environmental degradation can reduce labor productivity through adverse health effects.
II. Depletion of natural capital poses a constraint on future economic growth.
III. Environmental regulations always result in a net loss of total jobs in an economy.
Which of the above statement(s) is/are correct?
I. Environmental degradation can reduce labor productivity through adverse health effects.
II. Depletion of natural capital poses a constraint on future economic growth.
III. Environmental regulations always result in a net loss of total jobs in an economy.
Which of the above statement(s) is/are correct?
Explanation
Environmental degradation harms labor productivity by causing health issues like respiratory diseases, which lead to increased absenteeism. Furthermore, the depletion of natural capital creates long-term constraints because future production depends on these resources. While some argue that regulations kill jobs, modern evidence suggests that the transition to a green economy can actually create new opportunities in technology and renewable energy sectors.
Q44. Match List I with List II and select the correct answer using the codes given below:
| Environmental Economic Concepts | Descriptions |
|---|---|
| A. Negative Externality | i. The stock of natural ecosystems that yields a flow of valuable ecosystem goods or services. |
| B. Positive Externality | ii. Individuals benefiting from a public good without paying for it. |
| C. Free Rider Problem | iii. A cost suffered by a third party as a result of an economic transaction. |
| D. Natural Capital | iv. A benefit enjoyed by a third party as a result of an economic transaction. |
Explanation
A negative externality is a cost imposed on others, like pollution. A positive externality provides unintended benefits, such as a neighbor’s beautiful garden. The free-rider problem occurs when people use public goods without contributing to their cost. Natural capital represents the stock of ecosystems that provide valuable services. Understanding these concepts is essential for designing policies that correct market failures and promote sustainability.
Q45. Which of the following is the most appropriate example of a positive externality in consumption?
Explanation
Vaccination is a classic example of a positive externality because it benefits both the individual and the wider community. By becoming immune, the person reduces the likelihood of spreading the disease to others. This social benefit exceeds the private benefit to the individual. Because the market does not always account for these external gains, governments often provide vaccines for free or at a subsidy.
Q46. When a negative externality exists in the production of a good, the free market will typically:
Explanation
When a production process creates a negative externality, the private cost to the firm is lower than the true social cost. Consequently, the market price remains artificially low, leading consumers to buy more of the good. The resulting equilibrium involves a higher quantity of production than what is socially optimal. This overproduction causes excessive environmental damage and represents an inefficient allocation of resources.
Q47. A Pigouvian tax is designed to correct market failure by:
Explanation
A Pigouvian tax is a policy tool used to correct negative externalities. By setting a tax equal to the marginal external cost of an activity, the government forces producers to internalize the damage they cause. This increases the private cost of production, leading to higher prices and lower output. Ultimately, this mechanism aligns private incentives with social welfare and reduces overall pollution levels.
Q48. Consider the following statements regarding public goods and market failure:
I. Public goods are characterized by non-excludability and non-rivalry in consumption.
II. The free-rider problem makes it difficult for private markets to supply public goods efficiently.
III. National defense and street lighting are classic examples of public goods.
IV. Market mechanisms always provide the optimal amount of public goods without government intervention.
Which of the above statement(s) is/are correct?
I. Public goods are characterized by non-excludability and non-rivalry in consumption.
II. The free-rider problem makes it difficult for private markets to supply public goods efficiently.
III. National defense and street lighting are classic examples of public goods.
IV. Market mechanisms always provide the optimal amount of public goods without government intervention.
Which of the above statement(s) is/are correct?
Explanation
Public goods are non-excludable, meaning people cannot be prevented from using them, and non-rival, meaning one person’s use doesn’t reduce availability for others. These traits lead to the free-rider problem, where individuals consume the good without paying. Examples include national defense and lighthouses. Because private firms cannot easily profit from them, the market fails to provide an optimal amount without government intervention.
Q49. Arrange the following steps sequentially in the context of government intervention to correct a negative environmental externality (market failure):
I. Estimation of the marginal external cost caused by the pollution.
II. Identification of the negative externality (e.g., air pollution from a factory).
III. Implementation of a Pigouvian tax or emission cap.
IV. Reduction in the quantity produced to the socially optimal level.
Which of the following represents the correct sequence?
I. Estimation of the marginal external cost caused by the pollution.
II. Identification of the negative externality (e.g., air pollution from a factory).
III. Implementation of a Pigouvian tax or emission cap.
IV. Reduction in the quantity produced to the socially optimal level.
Which of the following represents the correct sequence?
Explanation
Government intervention to correct an environmental externality begins with identifying the specific source of pollution. Next, economists must estimate the marginal external cost to determine the appropriate policy scale. A Pigouvian tax or emission cap is then implemented based on these calculations. Finally, as producers respond to the new costs, the total quantity produced falls to a socially optimal and sustainable level.
Q50. The widely accepted definition of sustainable development as "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" was introduced by the:
Explanation
The classic definition of sustainable development was popularized by the 1987 report "Our Common Future," published by the World Commission on Environment and Development. It introduced the idea that current progress should not jeopardize the needs of future generations. This landmark report shifted the global conversation, emphasizing the need to balance economic growth with environmental protection and social equity.Answer key for these questions
| Q | Correct answer |
|---|---|
| 41 | (a) Depleted shared resources. |
| 42 | (d) Market failure leading to the misallocation of common property resources. |
| 43 | (b) I and II only |
| 44 | (a) A-iii, B-iv, C-ii, D-i |
| 45 | (b) An individual getting vaccinated against a contagious disease. |
| 46 | (a) Produce more than the socially optimal quantity of the good. |
| 47 | (b) Tax matching marginal external cost. |
| 48 | (a) I, II and III only |
| 49 | (a) II, I, III, IV |
| 50 | (c) 1987 Brundtland Commission Report |
Key facts from Economic Growth, Development and Sustainable Development
- Real GDP differs from nominal GDP because it is adjusted for price level changes (inflation).
- In the value-added method, the value of intermediate consumption is deducted from the value of output.
- GNP differs from GDP by the inclusion of net factor income from abroad.
- Net Domestic Product is obtained by deducting depreciation from Gross Domestic Product.
- National Income is equivalent to Net National Product at factor cost.
- Per capita income is national income divided by total population, and it masks welfare because it leaves out unpaid domestic work and leisure.
Frequently asked questions
How many RAS Prelims practice MCQs are there on Economic Growth, Development and Sustainable Development?
This page has 99 practice MCQs on Economic Growth, Development and Sustainable Development (Indian Economy). Each has the correct answer, and most have an explanation.
What is the difference between nominal and real GDP?
Nominal GDP is measured at current prices, and real GDP is adjusted for price level changes (inflation) by using the prices of a base year. Real GDP therefore shows the actual growth in the volume of output.
How does GNP differ from GDP?
GNP includes net factor income from abroad, that is income earned by a country’s residents abroad minus income earned by foreigners in the country. GDP counts only the output produced within the domestic territory.
What is National Income?
National Income is the Net National Product at factor cost. It is obtained from GDP by adding net factor income from abroad, deducting depreciation and subtracting indirect taxes net of subsidies.