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

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.

Answer: (a)

Returns to Scale refers to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms-- increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs.

It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.

Answer: (a)

Consumer sovereignty means that buyers ultimately determine which goods and services remain in production.

While businesses can produce and attempt to sell whatever goods they choose, if the goods fail to satisfy the wants and needs, consumers decide not to buy.

If the consumers do not buy, the businesses do not sell and the goods are not produced.

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: (a)

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

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.