introduction to micro economics section 6 MCQ Questions & Answers Detailed Explanation
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The following question based on Introduction to Micro Economics topic of indian economy mcq
(a) selling price
(b) normal profit
(c) supernormal profit
(d) both normal and supernormal profit
The correct answers to the above question in:
Answer: (c)
Monopoly power implies the amount of discretion that a monopolist possesses to fix up the prices of his products and the degree of control over his output decisions.
According to J.S. Bains, the degree of monopoly power can be measured by the monopoly firm's super-normal profit.
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Read more introduction to micro economics Based Indian Economy Questions and Answers
Question : 1
Economic rent refers to
a) Payment made for the use of land
b) Payment made for the use of labour
c) Payment made for the use of capital
d) Payment made for the use of organisation
Answer »Answer: (a)
Rent refers to that part of the payment by a tenant which is made only for the use of land, i.e., free gift of nature. The payment made by an agriculturist tenant to the landlord is not necessarily equaled to the economic rent.
A part of this payment may consist of interest on capital invested in the land by the landlord in the form of buildings, fences, tube wells, etc. The term ’economic rent’ refers to that part of the payment which is made for the use of land only, and the total payment made by a tenant to the landlord is called ‘contract rent’.
Economic rent is also called surplus because it emerges without any effort on the part of a landlord.
Question : 2
If the main objective of the government is to raise revenue, it should tax commodities with
a) high income elasticity of demand
b) high elasticity of demand
c) low elasticity of supply
d) low elasticity of demand
Answer »Answer: (d)
The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand.
However, low-income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people.
Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable.
Question : 3
Purchasing Power Parity theory is related with
a) Exchange rate
b) Interest rate
c) Bank rate
d) Wage rate
Answer »Answer: (a)
Purchasing power parity (PPP) is an economic theory and a technique used to determine the relative value of currencies, estimating the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to (or on par with) each currency’s purchasing power. It asks how much money would be needed to purchase the same goods and services in two countries, and uses that to calculate an implicit foreign exchange rate. Using that PPP rate, an amount of money thus has the same purchasing power in different countries.
Question : 4
The demand for necessities is
a) perfectly elastic
b) elastic
c) perfectly inelastic
d) inelastic
Answer »Answer: (c)
Inelastic demand means that if the price changes, the quantity demanded will not change much.
The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand.
Question : 5
Demand for complementary goods is known as
a) Cross demand
b) Joint demand
c) Derived demand
d) Direct demand
Answer »Answer: (b)
Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other.
Question : 6
The main determinant of real wage is
a) purchasing power of money
b) extra earning
c) nature of work
d) promotion prospect
Answer »Answer: (a)
The term real wages refers to wages that have been adjusted for inflation. This term is used in contrast to nominal wages or unadjusted wages.
Real wages provide a clearer representation of an individual’s wages. The real purchasing power of income or money is the key determinant of the real wage. It is an indication of an individual’s actual purchasing power.
Real wages are a useful economic measure, as opposed to nominal wages, which simply show the monetary value of wages in that year. However, real wages do not take into account other compensation like benefits or old-age pensions.
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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