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) oligopoly
(b) pure competition
(c) monopolistic competition
(d) monopoly
The correct answers to the above question in:
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.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
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 : 2
Elasticity (e) expressed by the formula l > e > 0 is
a) Relatively inelastic
b) Perfectly elastic
c) Relatively elastic
d) Perfectly inelastic
Answer »Answer: (a)
Elasticity (e) expressed by the formula 1 > e > 0 is relatively inelastic. Elasticity is responsiveness of one variable to a change in another, when other conditions are held constant.
Question : 3
According to modern thinking, the law of diminishing returns applies to
a) all fields of production
b) agriculture
c) industry
d) mining
Answer »Answer: (a)
The law of diminishing returns (also the law of diminishing marginal returns or law of increasing relative cost) states that in all productive processes, adding more of one factor of production, while holding all others constant (“ceteris paribus”), will at some point yield lower per-unit returns.
The law of diminishing returns does not imply that adding more of a factor will decrease the total production, a condition known as negative returns, though in fact, this is common.
Question : 4
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 : 5
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 : 6
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).
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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