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) relationship between factors of production
(b) technological relationship between physical inputs and output
(c) financial relationship between physical inputs and output
(d) relationship between finance and technology
The correct answers to the above question in:
Answer: (b)
Production involves the transformation of inputs into outputs. The output is a function of the input. The functional relationship between physical inputs and the physical output of a firm is called the production function. The word ‘function’ in mathematics means the precise relationship that exists between one dependent variable and a number (or one) of independent variables.
The production function states the maximum quantity of output that can be produced from any given quantity of various inputs during a given period of time.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
The marginal propensity to consume lies between
a) ∞ to ∞
b) 0 to 1
c) 0 to ∞
d) 1 to ∞
Answer »Answer: (b)
The Marginal Propensity to Consume (MPC) is measured as the ratio of the change in consumption to the change in income, thus giving us a figure between 0 and 1.
The MPC can be more than one if the subject borrowed money to finance expenditures higher than their income. One minus the MPC equals the marginal propensity to save.
Question : 2
Enterpreneurial ability is a special kind of labour that
a) manages to avoid losses by continual innovation
b) is hired out to firms at high wages
c) organizes the process of production
d) produces new capital goods to earn interest
Answer »Answer: (c)
In economics, factors of production are the inputs to the production process. Factors of production’ may also refer specifically to the ‘primary factors’, which are stocks including land, labour (the ability to work), and capital goods applied to production. Many economists today consider “human capital” (skills and education) as the fourth factor of production, with entrepreneurship as a form of human capital.
In markets, entrepreneurs combine the other factors of production, land, labour, and capital, in order to make a profit. Often these entrepreneurs are seen as innovators, developing new ways to produce and new products. In a planned economy, central planners decide how land, labour, and capital should be used to provide maximum benefit for all citizens.
Question : 3
If a good has negative income elasticity and positive price elasticity of demand, it is a
a) an inferior good
b) giffen good
c) normal good
d) superior good
Answer »Answer: (b)
Negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has a positive price elasticity of demand.
It is a good which people paradoxically consume more of as the price rises, violating the law of demand.
When the price goes up, the quantity demanded also goes up.
Question : 4
Wage fund theory was propounded by
a) J.M. Keynes
b) J.B. Say
c) J.S. Mill
d) J.R. Hicks
Answer »Answer: (c)
J.S. Mill developed the wages-fund theory. This theory of wage was an attempt to show that in certain circumstances wages could rise above subsistence level.
According to this theory, a fund of capital has to be accumulated in advance before wages could be paid. This fund of capital is called wages-fund out of which wages are paid to labourers.
Question : 5
The opportunity cost of a factor of production is
a) what it can earn in some other use.
b) what it is earning in its present use.
c) what it can earn in the long period.
d) what has to be paid to retain it in its present use.
Answer »Answer: (a)
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources.
It is equivalent to what a factor could earn for the firm in alternative uses.
Question : 6
If an industry is characterised by economies of scale then
a) the costs of entry into the market are likely to be substantial
b) barriers to entry are not very large
c) long run unit costs of production decreases as the quantity the firm produces increases
d) capital requirement are small due to the efficiency of the large scale operation
Answer »Answer: (c)
In microeconomics, economies of scale are the cost advantages that an enterprise obtains due to expansion. There are factors that cause a producer’s average cost per unit to fall as the scale of output is increased.
“Economies of scale” is a long-run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase.
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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