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) 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
The correct answers to the above question in:
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.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
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 : 2
Consumer gets maximum satisfaction at the point where
a) Marginal Cost = Price
b) Marginal Utility = Price
c) Marginal Utility > Price
d) Marginal Utility < Price
Answer »Answer: (b)
As per the law of diminishing marginal utility, the utility of each successive unit goes on diminishing as more and more units of a commodity are consumed.
A rational consumer will consume the commodity up to a point where the marginal utility of the final unit of the commodity is equal to the marginal utility of money (in terms of price) paid for it. In this way, the consumer will get maximum satisfaction and will be in equilibrium.
Question : 3
Demand of commodity mainly depends upon–
a) Advertisement
b) Purchasing will
c) Purchasing power
d) Tax policy
Answer »Answer: (c)
The demand of commodity mainly stems from the consumption capacity of the buyer. Demand is equal to desire plus ability to pay plus will to spend. Demand for a commodity depends upon a number of factors called Determinants.
The demand function can be symbolically expressed as:
QdN = f (PN, PR, I, T, E, O)
Where QdN = Quantity demanded the commodity;
PN = Price of the commodity;
PR = Price of the related commodity;
I = Income of consumers;
T = Taste & Preferences of the consumers;
E = Expectations about the future prices; and O= other factors.
Question : 4
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 : 5
Production function expresses
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
Answer »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.
Question : 6
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.
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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