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

Answer: (b)

Under Perfect Competition, the firm faces a horizontal demand curve. It can sell any quantity desired at the market price, but cannot sell anything above the market price.

Answer: (b)

Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment.

On the other hand, Microeconomics studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

So the study of sales of mobile phones by BSNL comes under microeconomics.

Answer: (b)

Average revenue is the amount of money received by a firm per unit of output sold. Marginal revenue is the change in total revenue resulting from a small change in the quantity sold.

In a perfectly competitive market, a firm’s Average Revenue is always equal to Marginal Revenue.

Answer: (a)

In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility.

An economic good is a consumable item that is useful to people but scarce in relation to its demand so that human effort is required to obtain it.

In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.

Answer: (b)

Because the monopolist is the market's only supplier, the demand curve the monopolist faces is the market demand curve.

The market demand curve is downward sloping, reflecting the law of demand.

The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.

Answer: (a)

A perfectly competitive industry is comprised of a large number of relatively small firms that sell identical products.

Each perfectly competitive firm is so small relative to the size of the market that it has no market control, it has no ability to control the price.

In other words, it can sell any quantity of output it wants at the going market price. This translates into a horizontal or perfectly elastic demand curve.