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

MOST IMPORTANT indian economy mcq - 8 EXERCISES

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The following question based on Introduction to Micro Economics topic of indian economy mcq

Questions : Consumer’s surplus is the highest in the case of:

(a) necessities

(b) durable goods

(c) luxuries

(d) comforts

The correct answers to the above question in:

Answer: (a)

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

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Read more introduction to micro economics Based Indian Economy Questions and Answers

Question : 1

The demand for labour is called

a) Factory demand

b) Market demand

c) Direct demand

d) Derived demand

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.

Question : 2

The supply of labour in the economy depends on

a) Natural resources

b) Population

c) National income

d) Per capita income

Answer: (b)

The supply curve for labor depends on variables such as population, wage rates, etc. in developing countries, the vast population base explains the relatively lower wage rates and easy accessibility to labour supply. This is just the opposite in the case of developed countries.

Question : 3

Expenditure on advertisement and public relations by an enterprise is a part of its

a) fixed capital

b) consumption of fixed capital

c) final consumption expenditure

d) intermediate consumption

Answer: (d)

Expenditure on the advertisement and public relations by an enterprise is a part of its intermediate consumption. These are treated as intermediate goods and services which form part of the cost of producing other goods.

Intermediate consumption consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises, including raw materials, services and various other operating expenses.

Question : 4

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: (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 : 5

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: (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 : 6

Under which market condition do firms have excess capacity?

a) Oligopoly

b) Perfect competition

c) Monopolistic competition

d) Duopoly

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.

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