Solution for the MCQ on Microeconomics is (a)
Equilibrium price is a state in economy where the supply of goods matches demand. When a major index experiences a period of consolidation or sideways momentum, it can be said that the forces of supply and demand are relatively equal and that the market is in a state of equilibrium. In short, it is the market price at which the supply of an item equals the quantity demanded.
Operating Surplus arises in the
(a) Government Sector
(b) Production for self-consumption
(c) Subsistence farming
(d) Enterprise Sector
Solution for the MCQ on Microeconomics is (a)
Operating surplus is an accounting concept used in national accounts statistics (such as United Nations System of National Accounts (UNSNA) and in corporate and government accounts. It is the balancing item of the Generation of Income Account in the UNSNA. It may be used in macro-economics as a proxy for total pre-tax profit income, although entrepreneurial income may provide a better measure of business profits. In UNSNA, “implicit (imputed) rents” on land owned by the enterprise and the “implicit (imputed) interest” chargeable on the use of the enterprise’s own funds are excluded from operating surplus.
The fixed cost on such factors of production which are neither hired nor bought by the firm is called
(a) social cost
(b) opportunity cost
(c) economic cost
(d) surcharged cost
Solution for the MCQ on Microeconomics is (a)
Social cost is defined as a sum of the private cost and external costs. The social cost is generally not borne by an individual. It may be borne by entire society, city or even country. This is not a one-time cost like private cost. This cost is recurrent and it is very difficult to calculate due to the inclusion of external costs. The cost may result from an event, action, or policy changes. Social costs are not calculated whenever a seller sells any product or item to buyer. This cost is added up from the use of that product.
One of the essential conditions of Monopolistic competition is
(a) Many buyers but one seller
(b) Price discrimination
(c) Product differentiation
(d) Homogeneous product
Solution for the MCQ on Microeconomics is (c)
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
A firm is in equilibrium when its
(a) marginal cost equals the marginal revenue
(b) total cost is minimum
(c) total revenue is maximum
(d) average revenue and marginal revenue are equal
Solution for the MCQ on Microeconomics is (a)
A consumer is in a state of equilibrium when he achieves maximum aggregate satisfaction on the expenditure that he makes depending on the set of conditions relating to his tastes and preferences, income, price and supply of the commodity etc. Producers’ equilibrium occurs when he maximizes his net profit subject to a given set of economic situations. A firm’s equilibrium point is when it has no inclination in changing its production. In short run Marginal revenue = Marginal Cost is the condition of equilibrium.
In Economics, production means
(a) manufacturing
(b) making
(c) creating utility
(d) farming
Solution for the MCQ on Microeconomics is (c)
All factors of production like land, labour, capital and entrepreneur are required in combination at a time to produce a commodity. Production means creation or an addition of utility. Factors of production (or productive ‘inputs’ or ‘resources’) are any commodities or services used to produce goods and services.
The concept that under a system of free enterprise, it is consumers who decide what goods and services shall be produced and in what quantities is known as
(a) Consumer Protection
(b) Consumer’s Decision
(c) Consumer Preference
(d) Consumer’s Sovereignty
Solution for the MCQ on Microeconomics is (d)
Consumer sovereignty means that buyers ultimately determine which goods and services remain in production. While businesses can produce and attempt to sell whatever goods they choose, if the goods fail to satisfy the wants and needs, consumers decide not to buy. If the consumers do not buy, the businesses do not sell and the goods are not produced.
Which of the following does not determine the supply of labor?
(a) Size and age structure of the population
(b) Nature of work
(c) Marginal productivity of labor
(d) Work-leisure ratio
Solution for the MCQ on Microeconomics is (c)
The term ‘supply of labour’ refers to the number of hours of a given type of labour which will be offered for hire at different wage rates. Usually, it is found that higher the wage rates larger is the supply indicating a direct relationship that exists between the wage rate i.e. the price of labour and labour hours supplied. The supply of labour is very much affected by the work leisure ratio which in turn is affected by the changes in wage rates. The supply of labour in an economy depends on various economic and non-eco nomic factors such as: population, sex composition, age composition of the population, willingness to work, wage rates, migration and immigration, working hours, social attitude and standard, legal barriers, education and training, employer’s attitude, labour supply and leisure, efficiency of workers, etc. In economics, the marginal product of labor (MPL) is the change in output that results from employing an added unit of labor. It has nothing to do with the supply of labour.
An expenditure that has been made and cannot be recovered is called
(a) Variable cost
(b) Opportunity cost
(c) Sunk cost
(d) Operational cost
Solution for the MCQ on Microeconomics is (c)
In economics and business decision-making, sunk costs are retrospective (past) costs that have already been incurred and cannot be recovered. Sunk costs are sometimes contrasted with prospective costs, which are future costs that may be incurred or changed if an action is taken. The sunk cost is distinct from economic loss. Sunk costs may cause cost overrun.
The demand curve for a Giffen good is
(a) upward rising
(b) downward falling
(c) parallel to the quantity axis
(d) parallel to the price axis
Solution for the MCQ on Microeconomics is (a)
A Giffen good is a good whose consumption increases as its price increases. (For a normal good, as the price increases, consumption decreases.) Thus, the demand curve will be upward instead of downward sloping. A Giffen good has an upward sloping demand curve because it is exceptionally inferior. It has a strong negative income elasticity of demand such that when a price changes the income effect outweighs the substitution effect and this leads to perverse demand curve.
