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) Meat
(b) Television
(c) Refrigerator
(d) Salt
The correct answers to the above question in:
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.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
Under which market condition do firms have excess capacity?
a) Oligopoly
b) Perfect competition
c) Monopolistic competition
d) Duopoly
Answer »Answer: (c)
Unlike a perfectly competitive firm, a monopolistically competitive firm ends up choosing a level of output that is below its minimum efficient scale. When the firm produces below its minimum efficient scale, it is under-utilizing its available resources.
In this situation, the firm is said to have excess capacity because it can easily accommodate an increase in production. This excess capacity is the major social cost of a monopolistically competitive market structure.
Question : 2
Perfect competition means
a) None of these
b) large number of buyers and less sellers
c) large number of buyers and sellers
d) large number of sellers and less buyers
Answer »Answer: (c)
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market.
Question : 3
At “Break-even point”,
a) the firm is at zero-profit point
b) the industry is in equilibrium in the long-run.
c) the producers suffers the minimum losses
d) the seller earns maximum profit
Answer »Answer: (a)
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first major step towards profitability.
Question : 4
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 : 5
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 : 6
Same price prevails throughout the market under
a) oligopoly
b) perfect competition
c) monopoly
d) monopolistic competition
Answer »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.
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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