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) long-run phenomenon
(b) timeless phenomenon
(c) directionless phenomenon
(d) short-run phenomenon
The correct answers to the above question in:
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.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
The concept that under a system of free enterprise, it is consumers who decide what goods and services shall be produced and in what quantities is known as
a) Consumer’s Sovereignty
b) Consumer Protection
c) Consumer’s Decision
d) Consumer Preference
Answer »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.
Question : 2
Under perfect competition, the industry does not have any excess capacity because each firm produces at the minimum point on its
a) long-run average revenue curve
b) long-run marginal cost curve
c) long-run average cost curve
d) long-run average variable cost curve
Answer »Answer: (c)
Under perfect competition, the firms operate at the minimum point of the long-run average cost curve.
In this way, the actual long-run output of the firm under monopolistic competition falls short of what is produced under perfect competition which can be considered the socially ideal output. This gives the measure of excess capacity which lies unutilized under imperfect competition.
Question : 3
Elasticity of demand measures the responsiveness of the quantity demanded of a goods to a
a) change in the price of joint products
b) change in the price of the goods
c) change in the price of substitutes
d) change in the price of the complements
Answer »Answer: (b)
Price elasticity of demand is a measure of the responsiveness of the quantity of a good or service demanded to changes in its price.
This measure of elasticity is sometimes referred to as the own-price elasticity of demand for a good, i.e., the elasticity of demand with respect to the good's own price, in order to distinguish it from the elasticity of demand for that good with respect to the change in the price of some other good, i.e., a complementary or substitute good.
Question : 4
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 »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 : 5
The supply of labour in the economy depends on
a) Natural resources
b) Population
c) National income
d) Per capita income
Answer »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 : 6
The demand for labour is called
a) Factory demand
b) Market demand
c) Direct demand
d) Derived demand
Answer »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.
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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