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

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: (d)

The supply curve shows the relationship between the price of a good and the quantity supplied, holding constant the values of all other variables that affect supply.

Each point on the curve shows the quantity that sellers would choose to sell at a specific price.

Answer: (b)

‘Labour’ refers to the people required to carry out a process in a business. Labour-intensive processes are those that require a relatively high level of labour compared to capital investment. These processes are more likely to be used to produce individual or personalised products or to produce on a small scale.

The costs of labour are:

1. wages and other benefits,
2. recruitment,
3. training and so on.

Labour-intensive processes are more likely to be seen in Job production and in smaller-scale enterprises.

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.