introduction to micro economics section 1 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (d)

The price of a good is also known as the Average Revenue of the firm. Average Revenue (AR) or Price and Marginal Revenue (MR) are identical.

When the former is constant, the latter is also constant. Moreover, the Average Revenue curve of a firm is the same as the individual demand curve.

Hence, the competitive demand curve is a horizontal straight line parallel to the OX axis.

Answer: (a)

In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good.

It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in the price of the second good.

For example, if, in response to a 10% increase in the price of fuel, the demand for new cars that are fuel inefficient decreased by 20%, the cross elasticity of demand would be -2.

A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products.

Answer: (d)

The Production function expresses a functional relationship amidst quantities of raw materials and goods.

It is the name given to the relationship between rates of input of productive services and the rate of output of product.

Answer: (c)

Human capital is the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labour so as to produce economic value.

It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions.

Answer: (c)

A seller’s market is a market that has more buyers than sellers. High prices result from this excess of demand oversupply.

The opposite of the seller’s market is the buyer’s market, where supply greatly exceeds demand.