demand & supply, profit loss, inflation & price index section 3 MCQ Questions & Answers Detailed Explanation

Answer: (b)

The way total output changes due to change in all inputs in the same proportion is known as “law of return to scale”.

Answer: (c)

With the increase in GDP, aggregate demand increases, because more production means people have more disposable income, which means more consumer spending.

As a result, prices rise in response, and in conclusion, because aggregate demand grows faster than long-term aggregate supply, economic growth will be coupled with inflation.

Hyperinflation - In economics, hyperinflation occurs when a country experiences very high and usually actuarially rates of inflation. Economic growth is usually coupled with inflation.

Answer: (a)

Monopolistic competition is a form of market in which there are large numbers of sellers of a particular products but each seller sells somewhat differentiated but close products.

Answer: (c)

Total fixed costs are constant, so the average fixed cost curve diminishes with the output. Thus, the average fixed cost curve is a rectangular hyperbola.