introduction to micro economics section 7 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (b)

Factor payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services.

Wages are paid for the services of labour; interest is the payment for the services of capital, rent is the services for land, and profit is the factor payment to entrepreneurship.

Answer: (b)

Average revenue is the revenue per unit of the commodity sold. It can be obtained by dividing the TR by the number of units sold.

Then, AR = TR/Q AR.

In other words, it means price.

Since the demand curve shows the relationship between price and the quantity demanded, it also represents the average revenue or price at which the various amounts of a commodity are sold, because the price offered by the buyer is the revenue from the seller’s point of view. Therefore, the average revenue curve of the firm is the same as the demand curve of the consumer.

Answer: (b)

Cheap money policy involves loans or credit with a low interest rate, or the setting of low-interest rates by the central bank of the country. Cheap money is good for borrowers but bad for investors.

The cheap money policy was one of the primary catalysts of the 2008 recession.

Answer: (b)

‘Labour’ refers to the people required to carry out a process in a business. Labour-intensive processes are those that require a relatively high level of labour compared to capital investment. These processes are more likely to be used to produce individual or personalised products or to produce on a small scale.

The costs of labour are:

1. wages and other benefits,
2. recruitment,
3. training and so on.

Labour-intensive processes are more likely to be seen in Job production and in smaller-scale enterprises.

Answer: (a)

Joseph Alois Schumpeter (1883-1950) was an Austrian-born American economist and social scientist. He did important early analyses of business cycles and economic growth.

He pinpointed technical innovation as the chief contributor to growth. In Capitatism, Socialism and Democracy (1942), he argued that capitalism would naturally evolve into socialism through its very success.