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

Answer: (b)

Other things being constant, cross demand expresses the relation between demand for good ‘A’ due to change in the price of its related good ‘B’. It shows that at different prices of good ‘B’ what different quantities of good A’ will be demanded.

Answer: (d)

In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absence of external influences, the (equilibrium) values of economic variables will not change.

For example, in the standard textbook model of perfect competition, equilibrium occurs at the point at which quantity demanded and quantity supplied is equal.

Equilibrium can change if there is a change in demand or supply conditions which are internal factor changes. In equilibrium, the price is endogenous because producers change their price

Answer: (c)

A demand curve that violates the law of demand is termed an exceptional demand curve. If a household expects the price of a commodity to increase, it may start purchasing a greater amount of the commodity even at the presently increased price. Similarly, if the household expects the price of the commodity to decrease, it may postpone its purchases.

Thus, the law of demand is violated in such cases. In this case, the demand curve does not slope down from left to right; instead, it presents a backward slope from the top right to down left. This curve is known as an exceptional demand curve.

Answer: (a)

In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments.

Gross profit = Net sales (total receipts) - Cost of goods sold (total expenditure).

Answer: (a)

The size of the market for a product refers to a number of buyers and sellers in a particular market.

This is especially important for companies that wish to launch a new product or service since small markets are less likely to be able to support a high volume of goods.

The market size is defined through the market volume and the market potential (defines the upper limit of the total demand and takes potential clients into consideration).