introduction to micro economics section 3 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (d)

Quasi-rent is the surplus that is received in a short period because of demand exceeding the supply by the man-made factors besides land. It is an analytical term in economics, for the income earned, in excess of post-investment opportunity cost, by a sunk cost investment.

In general, economic rent is the difference between the income from a factor of production in particular use, and either the cost of bringing the factor into economic use (Classical factor rent) or the opportunity cost of using the factor, where opportunity cost is defined as the current income minus the income available in the next best use.

Answer: (b)

In the short run, a firm that is operating at a loss (where the revenue is less than the total cost or the price is less than the unit cost) must decide to operate or temporarily shut down.

.It will shut down if the sale of the goods or services produced cannot even cover the variable costs of production.

Answer: (a)

If a person’s wage rises by ten per cent and prices rise by more than ten per cent, his real wage goes down.

Answer: (d)

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.

Answer: (a)

Price theory is also known as microeconomics and is concerned with the economic behaviour of individual consumers, producers and resource owners. Prof. Leftwich defines Price Theory as “it is concerned with the flow of goods and services from business firms to consumers, the composition of flow and the evaluation of pricing of the component parts of the flow.

It is concerned too with the flow of productive resources (or their services) from resource owners to business firms with their evaluation and with their allocation among alternative uses.”