introduction to micro economics section 4 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (a)

Consumer surplus is the difference between the price consumers would be prepared to pay and the actual market price.

Answer: (d)

The demand for labour is “derived” from the production and demand for the product being demanded.

If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is “derived” from the market demand for the product.

Answer: (b)

The supply curve for labor depends on variables such as population, wage rates, etc. in developing countries, the vast population base explains the relatively lower wage rates and easy accessibility to labour supply. This is just the opposite in the case of developed countries.

Answer: (d)

Expenditure on the advertisement and public relations by an enterprise is a part of its intermediate consumption. These are treated as intermediate goods and services which form part of the cost of producing other goods.

Intermediate consumption consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises, including raw materials, services and various other operating expenses.

Answer: (a)

Returns to Scale refers to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms-- increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs.

It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.