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

Answer: (b)

Social cost is defined as a sum of the private cost and external costs. The social cost is generally not borne by an individual. It may be borne by the entire society, city or even country.

This is not a one-time cost like a private cost. This cost is recurrent and it is very difficult to calculate due to the inclusion of external costs.

The cost may result from an event, action, or policy change. Social costs are not calculated whenever a seller sells any product or item to the buyer. This cost is added up from the use of that product.

Answer: (b)

The equilibrium price is a state in an economy where the supply of goods matches demand. When a major index experiences a period of consolidation or sideways momentum, it can be said that the forces of supply and demand are relatively equal and that the market is in a state of equilibrium.

In short, it is the market price at which the supply of an item equals the quantity demanded.

Answer: (a)

Division of Labor is the “specialization” of cooperative labour in specific, circumscribed tasks and like roles.

It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.

Answer: (c)

A market economy is an economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country’s individual citizens and businesses.

There is little government intervention or central planning. The United States is the world’s premier market economy.

Answer: (b)

In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic.

Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc.

If the electricity bill increases people utilize electricity for certain important urgent purposes and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.