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

Answer: (a)

Services done by a house-wife in her own house are not included in production.

Answer: (b)

Operating surplus is an accounting concept used in national accounts statistics (such as United Nations System of National Accounts (UNSNA) and in corporate and government accounts. It is the balancing item of the Generation of Income Account in the UNSNA.

It may be used in macroeconomics as a proxy for total pre-tax profit income, although entrepreneurial income may provide a better measure of business profits.

In UNSNA, “implicit (imputed) rents” on land owned by the enterprise and the “implicit (imputed) interest” chargeable on the use of the enterprise’s own funds are excluded from operating surplus.

Answer: (d)

In economics and cost accounting, the break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even".

A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.

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: (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: (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).