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) income falls
(b) price rises
(c) income rise
(d) price falls
The correct answers to the above question in:
Answer: (c)
In economics, income elasticity of demand measures the responsiveness of the demand for a good to a change in the income of the people demanding the good.
An Inferior good is a good that decreases in demand when consumer income rises, unlike normal goods, for which the opposite is observed. Normal goods are those for which consumers' demand increases when their income increases.
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Question : 1
Fixed cost is known as
a) Overhead cost
b) Special cost
c) Direct cost
d) Prime cost
Answer »Answer: (a)
Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business.
They tend to be time-related, such as salaries or rents being paid per month and are often referred to as overhead costs.
This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
Question : 2
Production function relates
a) Inputs to output
b) Cost to output
c) Cost to input
d) Wages to profit
Answer »Answer: (a)
Production function specifies the output of a firm, an industry, or an entire economy for all combinations of inputs.
The relationship of output to inputs is non-monetary; that is, a production function relates physical inputs to physical outputs, and prices and costs are not reflected in the function.
Question : 3
Price and output are determinates in market structure other than
a) monopsony
b) monopoly
c) perfect competition
d) oligopoly
Answer »Answer: (c)
Perfect competition is a form of market in which there are a large number of buyers and sellers competing with each other in the purchase and sale of goods, respectively and no individual buyer or seller has any influence over the price and output.
Each firm’s output is a perfect substitute for the output of the other firms, so the demand for each firm’s output is perfectly elastic. Product differentiation holds the key in this type of market structure.
Question : 4
Goods which are meant either for consumption or for investment are called
a) Intermediate goods
b) Final goods
c) Giffen goods
d) Inferior goods
Answer »Answer: (b)
All goods which are meant either
- for consumption by consumers or
- for investment by firms are called final goods.
They are finished goods, meant for final use. These are neither resold nor do they enter into further stages of production. For example, Cars, television sets, cloth, food, machinery, equipment etc. are final goods.
Question : 5
Equilibrium price is the price when :
a) supply is equal to demand
b) supply is greater than demand
c) supply is less than demand
d) demand is very high
Answer »Answer: (a)
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s).
How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
Question : 6
The addition to total cost by producing an additional unit of output by a firm is called
a) Opportunity cost
b) Variable cost
c) Average cost
d) Marginal cost
Answer »Answer: (d)
The addition to total cost by producing an additional unit of output by a firm is called Marginal cost. Average cost is the total cost of producing a given output divided by that output.
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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