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

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)

A seller’s market is a market that has more buyers than sellers. High prices result from this excess of demand oversupply.

The opposite of the seller’s market is the buyer’s market, where supply greatly exceeds demand.

Answer: (b)

Social cost is defined as a sum of the private cost and external costs. The social cost is generally not borne by an individual. It may be borne by the entire society, city or even country.

This is not a one-time cost like a private cost. This cost is recurrent and it is very difficult to calculate due to the inclusion of external costs.

The cost may result from an event, action, or policy change. Social costs are not calculated whenever a seller sells any product or item to the buyer. This cost is added up from the use of that product.

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 price of a good is also known as the Average Revenue of the firm. Average Revenue (AR) or Price and Marginal Revenue (MR) are identical.

When the former is constant, the latter is also constant. Moreover, the Average Revenue curve of a firm is the same as the individual demand curve.

Hence, the competitive demand curve is a horizontal straight line parallel to the OX axis.

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.