introduction to micro economics section 1 MCQ Questions & Answers Detailed Explanation
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The following question based on Introduction to Micro Economics topic of indian economy mcq
(a) increasing returns
(b) negative returns
(c) positive returns
(d) constant returns
The correct answers to the above question in:
Answer: (b)
The stages of Law of Variable Proportion are:
Stage 1: Increasing return;
Stage 2: Diminishing return; and
Stage 3: Negative Return.
In the third stage, the Marginal Product of the variable factor is zero. In this stage, the Total Product starts diminishing.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
The demand of a factor of production is
a) discretion of the producer
b) direct
c) derived
d) neutral
Answer »Answer: (c)
There are 4 factors of production;
- land,
- labour,
- capital and
- entrepreneurship.
The demand for the factors of production is a derived demand. That means these factors of production are demanded because there is a demand for the end product they produce.
Question : 2
‘Law of demand’ implies that when there is excess demand for a commodity, then
a) quantity demanded of the commodity falls
b) price of the commodity falls
c) price of the commodity remains same
d) price of the commodity rises
Answer »Answer: (d)
The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant.
That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in the quantity of goods demanded by the consumer will be negatively correlated to the change in the price of the good.
When there is excess demand for the commodity the price starts rising and it continues to rise till equilibrium price is reached.
Question : 3
A unit price elastic demand curve will touch
a) only quantity axis
b) both price and quantity axis
c) neither price axis, nor quantity axis
d) only price axis
Answer »Answer: (c)
Unit elastic refers to An elasticity alternative in which any percentage change in price causes an equal percentage change in quantity.
In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity.
However, the unit price elastic demand curve does not touch either the price axis or quantity axis.
Question : 4
In a Capitalistic Economy, the prices are determined by :
a) Sellers in the Market
b) Demand and Supply
c) Government Authorities
d) Buyers in the Market
Answer »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.
Question : 5
“Economics is what it ought to be” - This statement refers to
a) Fiscal economics
b) Normative economics
c) Positive economics
d) Monetary economics
Answer »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.”
Question : 6
The term utility means
a) None of these
b) usefulness of a commodity
c) the satisfaction which a commodity yields
d) the service which a commodity is capable of rendering
Answer »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.
GET Introduction to Micro Economics PRACTICE TEST EXERCISES
introduction to micro economics section 1
introduction to micro economics section 2
introduction to micro economics section 3
introduction to micro economics section 4
introduction to micro economics section 5
introduction to micro economics section 6
introduction to micro economics section 7
introduction to micro economics section 8
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