introduction to micro economics section 1 MCQ Questions & Answers Detailed Explanation

Answer: (a)

In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good.

It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in the price of the second good.

For example, if, in response to a 10% increase in the price of fuel, the demand for new cars that are fuel inefficient decreased by 20%, the cross elasticity of demand would be -2.

A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products.

Answer: (d)

The Production function expresses a functional relationship amidst quantities of raw materials and goods.

It is the name given to the relationship between rates of input of productive services and the rate of output of product.

Answer: (c)

Human capital is the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labour so as to produce economic value.

It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions.

Answer: (c)

Capital goods are goods that are used in producing other goods, rather than being bought by consumers.

They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.

Answer: (a)

Break-even is the point of balance between making either a profit or a loss. In economics & business, specifically cost accounting, 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.

Answer: (a)

The Theory of Economic Problem states that scarcity exists in the sense that only finite and insufficient resources are available to satisfy the needs and desires of all human beings.

The fundamental economic problem is how to allocate scarce resources to the provision of various goods and services within the economy.

The question then becomes how to determine what is to be produced, and how the factors of production (such as capital and labour) are to be allocated.