introduction to micro economics section 6 MCQ Questions & Answers Detailed Explanation

Answer: (b)

In economics, the law states that all else being equal, as the price of a product increases, quantity demanded falls; likewise, as the price of a product decreases, quantity demanded increases.

So basically the quantity demanded and the price of a commodity is inversely related, other things remaining constant.

Answer: (d)

All factors of production like land, labour, capital and entrepreneur are required in combination at a time to produce a commodity.

Production means the creation or an addition of utility. Factors of production (or productive ‘inputs’ or ‘resources’) are any commodities or services used to produce goods and services.

Answer: (d)

In economics, a production function relates the physical output of a production process to physical inputs or factors of production.

The primary purpose of the production function is to address allocative efficiency in the use of factor inputs in production and the resulting distribution of income to those factors.

Answer: (d)

A monopolist's marginal revenue is always less than or equal to the price of the good. Marginal revenue is the amount of revenue the firm receives for each additional unit of output.

It is the difference between total revenue - price times quantity - at the new level of output and total revenue at the previous output (one unit less).

Answer: (d)

Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location).

In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit.

In the long run, however, other firms enter the market and the benefits of differentiation decrease with the competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.

Answer: (d)

Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product.

According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.