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

Answer: (b)

In microeconomics, economies of scale are the cost advantages that an enterprise obtains due to expansion.

“Economies of scale” is a long-run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.

Answer: (b)

Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity, demanded of a good or service to a change in its price.

The formula for the coefficient of price elasticity of demand for a good is: $e_(R) = {{DQ}/Q}/{{dP}/P}$,

where $e_(R)$ = Elasticity of demand;

dQ/ Q= % change in demand and

dP/P= % change in price.

Answer: (d)

Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project.

A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital.

As the number of investments increases, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.

Answer: (c)

A market economy is an economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country’s individual citizens and businesses.

There is little government intervention or central planning. The United States is the world’s premier market economy.

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: (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.