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

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: (a)

The concept of opportunity cost is based on scarcity and choice. The opportunity cost of a commodity is the next best alternative commodity sacrificed. In other words, the opportunity cost of a commodity is forgoing the opportunity to produce alternative goods and services.

If one commodity is produced another commodity is sacrificed. So the opportunity cost of producing a good is equal to the cost of not producing another commodity.

Answer: (d)

The situation when a firm is operating at loss in a short period in perfect competition arises when the price is so low that total revenue is not even enough to cover the variable cost of production.

The shutdown point is that point at which the price is equal to average variable costs or the firm covers its variable costs.

So it should operate as long as it covers even the variable costs.

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)

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: (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.