introduction to macro economics section 5 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Heavy selling cost is one of the defining features of an oligopoly. Firms resort to heavy selling costs to attract customers.

Under this market form, the firms have to compete to promote their sale by largely homogenous products, differentiated mainly by heavy advertising and promotional expenditure that ultimately adds to the total selling cost.

Answer: (a)

The matrix method is a structural analysis method used as a fundamental principle in many applications in civil engineering. The method is carried out, using either a stiffness matrix or a flexibility matrix.

Primarily there are three methods of measuring national income. The methods are product method, income method and expenditure method.

Answer: (c)

Consumers do one of two things with their disposable income: They save it or they spend it. So Income = Consumption + Saving.

Answer: (a)

The Innovation Theory of Profit was proposed by Joseph. A. Schumpeter, who believed that an entrepreneur can earn economic profits by introducing successful innovations.

In other words, the innovation theory of profit posits that the main function of an entrepreneur is to introduce innovations and the profit in the form of reward is given for his performance.

Answer: (a)

Deflation sets in when aggregate supply exceeds aggregate demand. Recession sets in.

This will lead to a buildup in stocks (inventories) and this sends a signal to producers either to cut prices (to stimulate an increase in demand) or to reduce output so as to reduce the buildup of excess stocks.

Either way - there is a tendency for output to move closer to the current level of demand.

Answer: (d)

If output increases by that same proportional change as all inputs change then there are constant returns to scale (CRS).

If output increases by less than that proportional change in inputs, there are decreasing returns to scale (DRS). If output increases by more than that proportional change in inputs, there are increasing returns to scale (IRS).