Practice Quiz set 2 - indian economy mcq Online Quiz (set-1) For All Competitive Exams

Under Perfect Competition, the firm faces a horizontal demand curve. It can sell any quantity desired at the market price, but cannot sell anything above the market price.

Perfect competition is a form of market in which there are a large number of buyers and sellers competing with each other in the purchase and sale of goods, respectively and no individual buyer or seller has any influence over the price and output.

Each firm’s output is a perfect substitute for the output of the other firms, so the demand for each firm’s output is perfectly elastic. Product differentiation holds the key in this type of market structure.

Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the “father of modern economics.”

He is best known for two classic works:

1. The Theory of Moral Sentiments (1759), and
2. An Inquiry into the Nature and Causes of the Wealth of Nations (1776).

The Wealth of Nations is considered the first modern work of economics.

In economics, income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good.

An Inferior good is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed. Normal goods are those for which consumers' demand increases when their income increases.

The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has “broken even”.

A profit or a loss has not been made, although opportunity costs have been “paid”, and capital has received the risk-adjusted, expected return.

Final goods are goods that are ultimately consumed rather than used in the production of another good. For example, a car sold to a consumer is a final good; the components such as tires sold to the car manufacturer are not; they are intermediate goods used to make the final good.

Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business.

They tend to be time-related, such as salaries or rents being paid per month and are often referred to as overhead costs.

This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).

Any straight-line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:

The addition to total cost by producing an additional unit of output by a firm is called Marginal cost. Average cost is the total cost of producing a given output divided by that output.

In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered.

Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. The sunk cost is distinct from economic loss. Sunk costs may cause cost overrun.