introduction to micro economics section 4 MCQ Questions & Answers Detailed Explanation

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.

Answer: (a)

Consumer surplus is the difference between the price consumers would be prepared to pay and the actual market price.

Answer: (d)

The demand for labour is “derived” from the production and demand for the product being demanded.

If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is “derived” from the market demand for the product.

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.

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.

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.