introduction to micro economics section 2 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

Under Perfect Competition, the firm faces a horizontal demand curve. It can sell any quantity desired at the market price, but cannot sell anything above the market price.

Answer: (b)

Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment.

On the other hand, Microeconomics studies the behaviour of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms.

So the study of sales of mobile phones by BSNL comes under microeconomics.

Answer: (b)

Average revenue is the amount of money received by a firm per unit of output sold. Marginal revenue is the change in total revenue resulting from a small change in the quantity sold.

In a perfectly competitive market, a firm’s Average Revenue is always equal to Marginal Revenue.

Answer: (d)

A bilateral monopoly is a market consisting of a single seller (monopolist) and a single buyer (monopsonist).

For example, if a single firm produced all the copper in a country and if only one firm used this metal, the copper market would be a bilateral monopoly market.

The equilibrium in such a market cannot be determined by the traditional tools of demand and supply.

Answer: (a)

Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity, demanded of a good or service to a change in its price.

A decrease in the price of a good normally results in an increase in the quantity demanded by consumers because of the law of demand, and conversely, quantity demanded decreases when the price rises.

So, here the decrease in the price of Pepsi will increase in demand for it, while the demand for Coke and 7-Up will decrease because of no change in their price level.