Q41. In economics, the "Tragedy of the Commons" refers to a situation where:
Indian Economy: RAS Prelims MCQs
848 RAS Prelims practice MCQs on the Indian economy are on this page, in 10 chapters. They cover economic growth and development, the Human Development Index, monetary and fiscal policy and the Union Budget, fiscal federalism, agricultural development, industrial reforms and LPG, the service sector, energy and transport, skill development and employment, and social justice. Each question has an answer and an explanation.
Practice questions based on the RPSC RAS Prelims syllabus. They follow the exam pattern but are not past-paper questions.
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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 Indian Economy
- The RPSC syllabus lists economic concepts and the Indian economy as the first part of the Economy paper, followed by the economy of Rajasthan.
- Concept questions test definitions: nominal and real GDP, GNP and NDP, per capita income and the value-added method.
- Policy questions pair a tool with its effect, for example a rise in CRR reduces the lendable resources of banks.
- Scheme questions ask for the target group, ministry or year of schemes such as PMKVY, NAPS, PM SVANidhi and PM-SYM.
- Questions on Finance Commission and GST link the body to its Article, such as Article 280.
Frequently asked questions
How many RAS Prelims practice MCQs are there on Indian Economy?
This page has 848 practice MCQs on Indian Economy. Each has the correct answer, and most have an explanation.
Which chapters does the Indian economy set cover?
Ten chapters: economic growth, development and sustainable development; measurement of development (HDI); monetary and fiscal policy and the Union Budget; fiscal federalism and the Finance Commission; agricultural development; industrial growth and LPG reforms; the service sector; energy, transport and communication; skill development and employment; and social justice and empowerment.
Is the Indian economy in the RAS Prelims syllabus?
Yes. RPSC lists Economic Concepts and the Indian Economy as the first part of the Economy paper. The second part covers the economy of Rajasthan, which is on its own page.
How should I revise economy for RAS Prelims?
Learn the definitions and the cause-and-effect chains first, then the schemes with their year, ministry and target group. Attempt each chapter, read every explanation and keep a one-line note for each scheme and body.