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

Answer: (c)

In economics, ‘Utility,’ refers to the total satisfaction received from consuming a good or service.

It is usually applied by economists in such constructs as the indifference curve, which plots the combination of commodities that an individual or a society would accept to maintain a given level of satisfaction.

Answer: (b)

Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be.

It is the study or presentation of “what ought to be” rather than what actually is. Normative economics deals heavily with value judgments and theoretical scenarios.

An example of a normative economic statement would be, “We should cut taxes in half to increase disposable income levels”. By contrast, a positive (or objective) economic observation would be, “Big tax cuts would help many people, but government budget constraints make that option infeasible.”

Answer: (b)

Capitalism generally refers to an economic system in which the means of production are largely or entirely privately owned and operated for a profit, structured on the process of capital accumulation.

In general, investments, distribution, income, and pricing are determined by markets. In capitalism, prices are decided by the demand-supply scale.

For example, higher demand for certain goods and services lead to higher prices and lower demand for certain goods lead to lower prices.

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: (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)

In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic.

Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc.

If the electricity bill increases people utilize electricity for certain important urgent purposes and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.