introduction to micro economics section 4 MCQ Questions & Answers Detailed Explanation
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The following question based on Introduction to Micro Economics topic of indian economy mcq
(a) oligopoly
(b) perfect competition
(c) monopoly
(d) monopolistic competition
The correct answers to the above question in:
Answer: (b)
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
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Question : 1
The excess of price a person is to pay rather than forego the consumption of the commodity is called
a) Consumer’s surplus
b) Price
c) Profit
d) Producers’ surplus
Answer »Answer: (d)
‘Producer Surplus’ is an economic measure of the difference between the amount that a producer of a good receives and the minimum amount that he or she would be willing to accept for the good.
The difference, or surplus amount, is the benefit that the producer receives for selling the good in the market.
Question : 2
The Psychological law of consumption states that
a) consumption does not change with a change in income
b) proportionate increase in consumption is less than proportionate increase in income
c) increase in income is equal to increase in consumption
d) increase in consumption is greater than increase in income
Answer »Answer: (b)
According to Keynes’ psychological law of consumption, increased aggregate consumption is due to increased aggregate income – aggregate consumption increases with increase in aggregate income but the increase in consumption is less than the increase in the income.
This is because when the basic necessities or demands of the people are already fulfilled, they start saving the extra additional income.
Question : 3
The demand for which of the following commodity will not rise in spite of a fall in its price?
a) Meat
b) Television
c) Refrigerator
d) Salt
Answer »Answer: (d)
For certain goods called necessities, demand is not related to income. Demand for salt does not increase with the increase in income & does not decrease with the decrease in income.
It means that it is irrespective of income. The demand curve slopes downward for goods like salt, but it is inelastic.
Question : 4
Which from the following is not true when the interest rate in the economy goes up ?
a) Return on capital increases
b) Saving increases
c) Lending decreases
d) Cost of production increases
Answer »Answer: (a)
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital.
The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
Firms will demand loanable funds as long as the rate of return on capital is greater than or equal to the interest rate paid on funds borrowed. In case of an increase in interest rate, return on capital decreases.
Question : 5
“Marginal Cost” equals
a) the change in total cost divided by the change in quantity
b) total cost minus total benefit for the last unit produced
c) total cost divided by total benefit for the last unit produced
d) total cost divided by quantity
Answer »Answer: (a)
Marginal cost is the change in the total cost that arises when the quantity produced has an increment by unity.
That is, it is the cost of producing one more unit of a good. To illustrate marginal cost let’s assume that the total cost of producing 10,000 units is Rs. 50,000.
If we produce a total of 10,001 units the total cost is Rs. 50,002. That would mean the marginal cost—the cost of producing the next unit—was Rs. 2.
Question : 6
When the price of a commodity falls, we can expect
a) the demand for it to increase
b) the supply of it to increase
c) the demand for it to fall
d) the demand for it to stay constant
Answer »Answer: (a)
In economics, the law of demand is an economic law, which states that consumers buy more of a good when its price is lower and less when its price is higher.
The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant.
That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in the number of goods demanded by the consumer will be negatively correlated to the change in the price of the good.
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
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