introduction to micro economics section 2 MCQ Questions & Answers Detailed Explanation

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.

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:

Answer: (c)

Final goods are goods that are ultimately consumed rather than used in the production of another good. For example, a car sold to a consumer is a final good; the components such as tires sold to the car manufacturer are not; they are intermediate goods used to make the final good.

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.

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:

1. The Theory of Moral Sentiments (1759), and
2. 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.

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.