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

Answer: (d)

Quasi-rent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.

Answer: (d)

Perfect competition describes markets such that no participants are large enough to have the market power to set the price of a homogeneous product.

In the short run, perfectly competitive markets are not productively efficient as output will not occur where marginal cost is equal to average cost (MC=AC).

They are allocatively efficient, as output will always occur where marginal cost is equal to marginal revenue (MC=MR).

Answer: (d)

The supply curve shows the relationship between the price of a good and the quantity supplied, holding constant the values of all other variables that affect supply.

Each point on the curve shows the quantity that sellers would choose to sell at a specific price.

Answer: (a)

An entrepreneur performs a series of functions necessary right from the genesis of an idea up to the establishment and effective operation of an enterprise.

The functions of an entrepreneur as a risk bearer are specific in nature. The entrepreneur assumes all possible risks of business that emerges due to the possibility of changes in the tastes of consumers, modern techniques of production and new inventions.

Such risks are not insurable and incalculable. In simple terms, such risks are known as uncertainty concerning a loss.

Answer: (c)

Production refers to “the creation of utility having value-in-exchange.” The process of production may create six types of utilities: form utility, time utility, place utility, ownership utility, service utility and knowledge utility.