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

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: (a)

Price theory is also known as microeconomics and is concerned with the economic behaviour of individual consumers, producers and resource owners. Prof. Leftwich defines Price Theory as “it is concerned with the flow of goods and services from business firms to consumers, the composition of flow and the evaluation of pricing of the component parts of the flow.

It is concerned too with the flow of productive resources (or their services) from resource owners to business firms with their evaluation and with their allocation among alternative uses.”

Answer: (d)

A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity, This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with an oligopoly which consists of a few entities dominating an industry.

Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods

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: (d)

Quasi-rent is the surplus that is received in a short period because of demand exceeding the supply by the man-made factors besides land. It is an analytical term in economics, for the income earned, in excess of post-investment opportunity cost, by a sunk cost investment.

In general, economic rent is the difference between the income from a factor of production in particular use, and either the cost of bringing the factor into economic use (Classical factor rent) or the opportunity cost of using the factor, where opportunity cost is defined as the current income minus the income available in the next best use.

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.