introduction to micro economics section 8 MCQ Questions & Answers Detailed Explanation

Answer: (a)

The following elements are included in the cost of production:

1. Purchase of raw machinery,
2. Installation of plant and machinery,
3. Wages of labour,
4. Rent of Building,
5. Interest on capital,
6. Wear and tear of the machinery and building,
7. Advertisement expenses,
8. Insurance charges,
9. Payment of taxes,
10. In the cost of production, the imputed value of the factor of production owned by the firm itself is also added,
11. The normal profit of the entrepreneur is also included In the cost of production.

Answer: (d)

Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price.

It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).

Answer: (c)

If workers receive a higher nominal wage and the price level does not change, then the real purchasing power of their wages is higher and they are inclined to increase the quantity of labour supplied.

If the workers receive the same nominal wage, but the price level increases, then the real purchasing power of their wages is lower and they are inclined to decrease the quantity of labour supplied.

Any combination of changes in nominal resource prices or the price level that changes the purchasing power of resource prices entices resource owners to change quantities supplied.

Answer: (a)

The production of two or more goods simultaneously from the same imputs is called Joint Supply. Wool and Mutton are an example for joint supply.

Answer: (d)

If quantity demanded changes by a very large percentage as a result of a tiny percentage change in price, then the demand is said to be perfectly elastic.

It reflects the fact that the quantity demanded is extremely responsive to even a small change in price.

Technically, the elasticity in this extreme case would be undefined but it approaches negative infinity as demand becomes more elastic.

Answer: (a)

Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.