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

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: (d)

In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month and are often referred to as overhead costs.

For some employees, salary is paid on monthly rates, independent of how many hours the employees work. This is a fixed cost. On the other hand, the hours of hourly employees paid in wages can often be varied, so this type of labour cost is a variable cost.

Answer: (c)

Economic rent in the sense of surplus over transfer earnings arises when the supply of the factor units is less than perfectly elastic or not perfectly elastic.

When the supply of factor units is perfectly elastic, there is no surplus or economic rent and the actual earnings and transfer earnings are equal.

In such a scenario, at a given price or remuneration, the entrepreneur can engage any number of factor units.

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: (c)

The basic causal relationship between the price level and the value of money is that as the price level goes up, the value of money goes down.

The "value of money" refers to what a unit of money can buy whereas the "price level" refers to the average of all of the prices of goods and services in a given economy.

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.