introduction to micro economics section 5 MCQ Questions & Answers Detailed Explanation

Answer: (c)

In treatments of monopolistic competition, Edward Chamberlin and Joan Robinson are usually credited with simultaneously and independently developing the theory of monopolistic or imperfect competition.

Chamberlin published his book ‘The Theory of Monopolistic Competition’ in 1933, the same year that Joan Robinson published her book on the same topic: ‘The Economics of Imperfect Competition,’ so these two economists can be regarded as the parents of the modern study of imperfect competition.

Answer: (d)

The ‘Principle of Maximum Social Advantage’, introduced by British economist Hugh Dalton, is the fundamental principle of Public Finance which implies that all the financial operations of the state should aim at maximization of net social benefit.

It takes into consideration both the aspects of public finance that is the government revenue or taxation as well as government expenditure. Since it studies problems related to government taxation and spending, it comes under the domain of fiscal economics.

Answer: (d)

Division of labour is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.

As it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in other words, by the extent of the market. When the market is very small, no person can have any encouragement to dedicate himself entirely to one employment.

Answer: (c)

Negative income elasticity of demand is associated with inferior goods; an increase in income will lead to a fall in the demand and may lead to changes to more luxurious substitutes.

Positive income elasticity of demand is associated with normal goods; an increase in income will lead to a rise in demand.

Answer: (d)

In economics and cost accounting, 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.”

Answer: (d)

In economics, diminishing returns (also called diminishing marginal returns) is the decrease in the marginal (per-unit) output of a production process as the amount of a single factor of production is increased, while the amounts of all other factors of production stay constant.

This law plays a central role in production theory.