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) 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
The correct answers to the above question in:
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.
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Question : 1
Which of the following does not determine supply of labour ?
a) Work-leisure ratio
b) Size and age-structure of population
c) Nature of work
d) Marginal productivity of labour
Answer »Answer: (d)
The term ‘supply of labour’ refers to the number of hours of a given type of labour that will be offered for hire at different wage rates. Usually, it is found that the higher the wage rates larger is the supply indicating a direct relationship that exists between the wage rate i.e. the price of labour and labour hours supplied.
The supply of labour is very much affected by the work leisure ratio which in turn is affected by the changes in wage rates.
The supply of labour in an economy depends on various economic and non-economic factors such as:
- population,
- sex composition,
- age composition of the population,
- willingness to work,
- wage rates,
- migration and immigration,
- working hours,
- social attitude and standard,
- legal barriers,
- education and training,
- employer’s attitude,
- labour supply and leisure,
- the efficiency of workers, etc.
In economics, the marginal product of labour (MPL) is the change in output that results from employing an added unit of labour. It has nothing to do with the supply of labour.
Question : 2
Product differentiation is the most important feature of
a) oligopoly
b) pure competition
c) monopolistic competition
d) monopoly
Answer »Answer: (c)
There are six characteristics of monopolistic competition (MC):
- Product differentiation;
- many firms;
- Free entry and exit in the long run;
- Independent decision making;
- market power; and
- Buyers and Sellers do not have perfect information.
Question : 3
The relationship between price of a commodity and the demand for it
a) They do not have any relationship
b) is a positive relationship
c) is an inverse relationship
d) They are independent of each other
Answer »Answer: (c)
According to the Law of demand, consumers buy more of a good when its price is lower and less when its price is higher.
It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant.
Question : 4
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 : 5
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 : 6
Which law states that with constant taste and preferences, the proportion of income spend on food stuff diminishes as income increases?
a) Engel’s Law
b) Say’s Law
c) Griffin’s Law
d) Gresham’s Law
Answer »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.
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
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