introduction to micro economics section 5 MCQ Questions & Answers Detailed Explanation
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The following question based on Introduction to Micro Economics topic of indian economy mcq
(a) Engel’s Law
(b) Say’s Law
(c) Griffin’s Law
(d) Gresham’s Law
The correct answers to the above question in:
Answer: (a)
According to Engel's Law, as the disposable income of a consumer increases, the percentage of income spent on food decreases if all other factors remain constant.
This happens even when the actual expenditure on food rises. The income elasticity of demand for food is less than 1. A lower Engel coefficient indicates a higher standard of living.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
A fall in demand or rise in supply of a commodity–
a) determines the price elasticity
b) Increases the price of that commodity
c) decreases the price of that commodity
d) neutralises the changes in the price
Answer »Answer: (c)
The four basic laws of supply and demand are:
- If demand increases and supply remains unchanged, a shortage occurs, leading to a higher price;
- If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower price;
- If demand remains unchanged and supply increases, a surplus occurs, leading to a lower price; and
- If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher price.
Question : 2
Under increasing returns the supply curve is
a) parallel to the price -axis
b) positively sloped from left to right
c) negatively sloped from left to right
d) parallel to the quantity-axis
Answer »Answer: (b)
Supply curve, in economics, is a graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply. Product price is measured on the vertical axis of the graph and quantity of product supplied on the horizontal axis.
In most cases, when there are increasing returns, the supply curve is drawn as a slope rising upward from left to right, since product price and quantity supplied are directly related (i.e., as the price of commodity increases in the market, the amount supplied increases).
Question : 3
What is selling cost ?
a) Cost incurred on advertisement
b) Cost incurred on transportation of commodities to market
c) Cost incurred on promoting the sale of the product
d) Cost incurred on commission and salaries personnel
Answer »Answer: (c)
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods.
Question : 4
A firm is in equilibrium when its
a) average revenue and marginal revenue are equal
b) marginal cost equals the marginal revenue
c) total cost is minimum
d) total revenue is maximum
Answer »Answer: (b)
A consumer is in a state of equilibrium when he achieves maximum aggregate satisfaction on the expenditure that he makes depending on the set of conditions relating to his tastes and preferences, income, price and supply of the commodity etc.
Producers’ equilibrium occurs when he maximizes his net profit subject to a given set of economic situations. A firm’s equilibrium point is when it has no inclination in changing its production.
In the short run Marginal revenue = Marginal Cost is the condition of equilibrium.
Question : 5
Economic rent does not arise when the supply of a factor unit is
a) Relatively inelastic
b) Perfectly inelastic
c) Perfectly elastic
d) Relatively elastic
Answer »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.
Question : 6
Which of the following are not fixed costs?
a) Insurance charges
b) Rent on land
c) Municipal taxes
d) Wages paid to workers
Answer »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.
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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