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

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: (b)

The equilibrium price is a state in an economy where the supply of goods matches demand. When a major index experiences a period of consolidation or sideways momentum, it can be said that the forces of supply and demand are relatively equal and that the market is in a state of equilibrium.

In short, it is the market price at which the supply of an item equals the quantity demanded.

Answer: (a)

Division of Labor is the “specialization” of cooperative labour in specific, circumscribed tasks and like roles.

It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.

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: (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: (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.