introduction to macro economics section 6 MCQ Questions & Answers Detailed Explanation

Answer: (c)

In perfect competition, the existence of a large number of firms producing and selling the product ensures that an individual firm exercises no influence over the price of the product.

The output of an individual firm constitutes a very small fraction of the total output of the whole industry so that any increase or decrease in output by an individual firm has a negligible effect on the total supply of product of the industry.

As a result, a single firm is not in a position to influence the price of the product by the increasing or reducing its output.

Answer: (a)

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

Product method is given by Dr Alfred Marshall, income method by A.C. Pigou and expenditure method by Dr Irving Fisher.

The ‘Investment Method’ is used for trading properties where evidence of rates is slight, such as hotels, cinema, car parks and etc.

Answer: (d)

Saving function is a mathematical relation between saving and income by the household sector.

This function captures the saving-income relation, the flip side of the consumption-income relation that forms one of the key building blocks for Keynesian economics.

Answer: (c)

Capital output ratio is the ratio of capital used to produce an output over a period of time.

This ratio has a tendency to be high when capital is cheap as compared to other inputs. For instance, a country with abundant natural resources can use its resources in lieu of capital to boost its output; hence the resulting capital output ratio is low.

Answer: (c)

Laissez Faire is an economic theory from the 18th century that is strongly opposed to any government intervention in business affairs.

Sometimes it is referred to as “let it be economics.” It is an economic environment in which transactions between private parties are free from tariffs, government subsidies, and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression.

Answer: (d)

In his 1798 work, An Essay on the Principle of Population, Malthus examined the relationship between population growth and resources and developed the Malthusian theory of population growth.

He proposed that human populations grow exponentially (i.e., doubling with each cycle) while food production grows at an arithmetic rate (i.e. by the repeated addition of a uniform increment in each uniform interval of time).