introduction to micro economics section 3 MCQ Questions & Answers Detailed Explanation

Answer: (b)

In the short run, a firm that is operating at a loss (where the revenue is less than the total cost or the price is less than the unit cost) must decide to operate or temporarily shut down.

.It will shut down if the sale of the goods or services produced cannot even cover the variable costs of production.

Answer: (a)

If a person’s wage rises by ten per cent and prices rise by more than ten per cent, his real wage goes down.

Answer: (d)

Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.

Answer: (b)

Consumer surplus is the difference between the maximum price a consumer is willing to pay and the actual price they do pay.

If a consumer would be willing to pay more than the current asking price, then they are getting more benefit from the purchased product than they spent to buy it.

Answer: (c)

Adam Smith is known as ‘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).

Answer: (d)

The demand curve facing a perfectly competitive firm is flat or horizontal. This is because all firms in perfect competition are by definition selling an identical (homogeneous) product.

A horizontal demand curve is a flat curve with a slope of zero. It is a perfectly elastic demand curve. Because the slope of the curve is zero, it is impossible for the price to change in the market.