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

Answer: (a)

Selling costs are the expenses on an advertisement, salesmanship, free sampling, free service, door-to door canvassing, and so on.

There is no selling problem under perfect competition where the product is homogeneous. Under monopolistic competition where the product is differentiated, selling costs are essential to push up the sales.

They are incurred to persuade a buyer to purchase one product in preference to another.

Answer: (a)

National income is the total value of a country’s final output of all new goods and services produced in one year.

Transfer payments are not a part of the national income so they are cut from national income to get n.n.p in order to arrive at national income such payments are bad debts incurred by banks, payments of pensions, charity, scholarships etc.

Private-sector transfers include charitable donations and prizes to lottery winners.

Answer: (b)

The Consumption function is a single mathematical function used to express consumer spending.

It was developed by John Maynard Keynes and detailed most famously in his book The General Theory of Employment, Interest, and Money.

It is made up of autonomous consumption that is not influenced by current income and induced consumption that is influenced by the economy's income level.

Answer: (b)

Marginal Utility = Change in Total Utility / Change in number of Units consumed.

The first component of the formula is to calculate the change in total utility. The second component of the marginal utility formula is the change in the number of units that have been consumed.

This is done by subtracting the number that is currently being consumed from a previously consumed amount.

So, Marginal Utility (MU) from 10th Unit = TU₁₀ - TU₉

= 15 – 20= –5

Answer: (d)

Keynesian Economics is an economic theory of total spending in the economy and its effects on output and inflation. It emphasizes that government expenditures (or tax cuts) leads to increase in GDP which is a multiple of the original expenditure.

Answer: (c)

Inventory refers to raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale.

Inventory represents one of the most important assets that most businesses possess because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders/owners.