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

Answer: (b)

Intermediate consumption is an accounting concept that measures the value of the goods and services consumed as inputs by a process of production.

It excludes fixed assets whose consumption is recorded as the consumption of fixed capital. The goods and services may be either transformed or used up by the production process.

Intermediate goods or services used in production can be either changed in form (e.g. bulk sugar) or completely used up (e.g. electric power, water, etc).

Answer: (b)

Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business.

They tend to be time-related, such as salaries or rents being paid per month and are often referred to as overhead costs. The salaries of administrative staff are variable costs.

Answer: (c)

Some economists have classified factors into two categories, land and labour (or nature and man) on the ground that they are the only original or primary factors.

It is said that capital has no independent origin and is merely the outcome of combined efforts of land and labour.

However, other economists include all man-made instruments for production in the category of Capital. It includes machines, tools, factories, buildings, canals, roads, raw materials, etc, which play a vital role in production.

Factors of Production:

1. Land -.All free gifts of nature, i.e., soil, forests, mountains, seas. etc.
2. Labour - Human, a physical or mental effort done for income or material benefit
3. Capital - All man-made means of production like machines, tools, buildings, roads, raw materials, etc
4. Entrepreneur - Human resource that helps to organize production, i.e., takes the risk and combines land, labour and capital to produce.

Answer: (d)

In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good.

It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in the price of the second good.

A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products.

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)

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.