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) lack of industries
(b) overpopulation
(c) unemployment
(d) scarcity of resources
The correct answers to the above question in:
Answer: (d)
The theory of Economic problems states that there is scarcity, or that the finite resources available are insufficient to satisfy all human wants and needs.
The problem then becomes how to determine what is to be produced and how the factors of production (such as capital and labour) are to be allocated.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
Extreme forms of markets are
a) Perfect competition; Monopolistic competition
b) Perfect competition; Oligopoly
c) Oligopoly; Monopoly
d) Perfect competition; Monopoly
Answer »Answer: (d)
There are two extreme forms of market structure: monopoly and, its opposite, perfect competition.
Perfect competition is characterized by many buyers and sellers, many products that are similar in nature and, as a result, many substitutes.
A monopoly is a market structure in which there is only one producer/ seller for a product.
Question : 2
Engel’s Law states the relationship between
a) quantity demanded and income of the consumers
b) quantity demanded and price of a commodity
c) quantity demanded and price of substitutes
d) quantity demanded and tastes of the consumers
Answer »Answer: (a)
Engel’s law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises.
In other words, the income elasticity of demand for food is between 0 and 1.
Engel’s Law doesn’t imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products (in % terms) less than their increases in income.
Question : 3
The most distinguishing feature of oligopaly is
a) price leadership
b) number of firms
c) interdependence
d) negligible influence on price
Answer »Answer: (c)
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers (oligopolists). Because there are few sellers, each oligopolist is likely to be aware of the actions of the others. The decisions of one firm influence, and are influenced by, the decisions of other firms.
Some of its characteristics are:
- Profit maximization conditions;
- Number of firms;
- Product differentiation;
- Interdependence;
- Non-Price Competition, etc.
The distinctive feature of an oligopoly is interdependence.
Oligopolies are typically composed of a few large firms. Each firm is so large that its actions affect market conditions. Therefore the competing firms will be aware of a firm’s market actions and will respond appropriately.
This means that in contemplating a market action, a firm must take into consideration the possible reactions of all competing firms and the firm’s countermoves.
Question : 4
A refrigerator operating in a chemist’s shop is an example of
a) consumer’s good
b) free good
c) final good
d) producers good
Answer »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.
Question : 5
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 : 6
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.
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
Introduction to Micro Economics Shortcuts and Techniques with Examples
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