introduction to micro economics section 2 MCQ Questions & Answers Detailed Explanation
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The following question based on Introduction to Micro Economics topic of indian economy mcq
(a) Average cost curve
(b) Marginal cost curve
(c) Average variable cost curve
(d) Average fixed cost curve
The correct answers to the above question in:
Answer: (d)
Average fixed cost curve is never ‘U’ shaped. Since total fixed costs are unchanged as output rises, the average fixed cost curve falls continuously as output is increased.
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Question : 1
The ‘break-even point’ is where
a) None of these
b) marginal revenue equals marginal cost
c) average revenue equals average cost
d) total revenue equals total cost
Answer »Answer: (c)
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has “broken even”.
A profit or a loss has not been made, although opportunity costs have been “paid”, and capital has received the risk-adjusted, expected return.
Question : 2
Different firms constituting the industry, produce homogeneous goods under
a) perfect competition
b) monopoly
c) monopolistic competition
d) oligopoly
Answer »Answer: (a)
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market.
The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another.
Question : 3
If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be
a) equal to unity
b) less than unity
c) infinitely large
d) greater than unity
Answer »Answer: (a)
Any straight-line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
Elasticity | Description | Effect on quantity supply of 1% increase in price |
Zero | Perfectly inelastic (vertical straight line) | |
Between 0 and 1 | Inelastic | Increased by less than 1% |
1 | Unitary elastic | Increased by exactly 1% |
Greater than 1 | Elastic | Increased by more than 1 % |
Infinity | Perfectly elastic (horizontal straight line) | Infinite increase |
Question : 4
Which of the following economists is called the Father of Economics ?
a) Adam Smith
b) Malthus
c) Robinson
d) Ricardo
Answer »Answer: (a)
Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the “father of modern economics.”
He is best known for two classic works:
- The Theory of Moral Sentiments (1759), and
- An Inquiry into the Nature and Causes of the Wealth of Nations (1776).
The Wealth of Nations is considered the first modern work of economics.
Question : 5
The law of demand states that
a) if the price of a good increases, the quantity demanded of that good increases.
b) if the price of a good increases, the demand for that good decreases.
c) if the price of a good increases, the the demand for that good increases.
d) if the price of a good increases, the quantity demanded of that good decreases.
Answer »Answer: (d)
The law of demand states that other things remaining the same, the quantity demanded of a commodity is inversely related to its price.
Thus, according to the law of demand, there is an inverse relationship between price and quantity demanded, other things remaining the same.
Question : 6
In a free enterprise economy, resource allocation is determined by
a) the traditional employment of factors
b) the pattern of consumers’ spending
c) the wealth of the entrepreneurs
d) decision of the Government
Answer »Answer: (b)
In a free-market economy, resources are allocated through the interaction of free and self-directed market forces.
This means that what to produce is determined by consumers’ capacity to spend. How to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers.
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
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introduction to micro economics section 8
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