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

Answer: (c)

Production refers to “the creation of utility having value-in-exchange.” The process of production may create six types of utilities: form utility, time utility, place utility, ownership utility, service utility and knowledge utility.

Answer: (b)

Other things being constant, cross demand expresses the relation between demand for good ‘A’ due to change in the price of its related good ‘B’. It shows that at different prices of good ‘B’ what different quantities of good A’ will be demanded.

Answer: (d)

In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absence of external influences, the (equilibrium) values of economic variables will not change.

For example, in the standard textbook model of perfect competition, equilibrium occurs at the point at which quantity demanded and quantity supplied is equal.

Equilibrium can change if there is a change in demand or supply conditions which are internal factor changes. In equilibrium, the price is endogenous because producers change their price

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: (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)

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.