introduction to micro economics section 7 MCQ Questions & Answers Detailed Explanation

Answer: (a)

Joseph Alois Schumpeter (1883-1950) was an Austrian-born American economist and social scientist. He did important early analyses of business cycles and economic growth.

He pinpointed technical innovation as the chief contributor to growth. In Capitatism, Socialism and Democracy (1942), he argued that capitalism would naturally evolve into socialism through its very success.

Answer: (d)

Quasi-rent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.

Answer: (d)

Perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product.

In the short run, perfectly competitive markets are not productively efficient as output will not occur where marginal cost is equal to average cost (MC=AC).

They are allocatively efficient, as output will always occur where marginal cost is equal to marginal revenue (MC=MR).

Answer: (b)

Cheap money policy involves loans or credit with a low interest rate, or the setting of low-interest rates by the central bank of the country. Cheap money is good for borrowers but bad for investors.

The cheap money policy was one of the primary catalysts of the 2008 recession.

Answer: (b)

Average revenue is the revenue per unit of the commodity sold. It can be obtained by dividing the TR by the number of units sold.

Then, AR = TR/Q AR.

In other words, it means price.

Since the demand curve shows the relationship between price and the quantity demanded, it also represents the average revenue or price at which the various amounts of a commodity are sold, because the price offered by the buyer is the revenue from the seller’s point of view. Therefore, the average revenue curve of the firm is the same as the demand curve of the consumer.

Answer: (b)

Factor payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services.

Wages are paid for the services of labour; interest is the payment for the services of capital, rent is the services for land, and profit is the factor payment to entrepreneurship.