Which is the most essential function of an entrepreneur?
(a) Supervision
(b) Management
(c) Marketing
(d) Risk bearing
Microeconomics Questions answer is (d)
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 risk bearer are specific in nature. The entrepreneur assumes all possible risks of business which 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.
Purchasing Power Parity theory is related with
(a) Interest rate
(b) Bank rate
(c) Wage rate
(d) Exchange rate
Microeconomics Questions answer is (d)
Purchasing power parity (PPP) is an economic theory and a technique used to determine the relative value of currencies, estimating the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to (or on par with) each currency’s purchasing power. It asks how much money would be needed to purchase the same goods and services in two countries, and uses that to calculate an implicit foreign exchange rate. Using that PPP rate, an amount of money thus has the same purchasing power in different countries.
When the total product rises at an increasing rate, the
(a) marginal product is zero
(b) marginal product is rising
(c) marginal product is falling
(d) the marginal product remains constant
Microeconomics Questions answer is (b)
Marginal product of an input (factor of production) is the extra output that can be produced by using one more unit of the input (for instance, the difference in output when a firm’s labor usage is increased from five to six units), assuming that the quantities of no other inputs to production change. Marginal product, which occasionally goes by the alias marginal physical product (MPP), is one of two measures derived from total product. The other is average product. Marginal product is directly proportional to total product.
A refrigerator operating in a chemist’s shop is an example of
(a) free good
(b) final good
(c) producers good
(d) consumer’s good
Microeconomics Questions answer is (b)
Final goods are goods that are ultimately consumed rather than used in the production of another good. For example, a car sold to a consumer is a final good; the components such as tires sold to the car manufacturer are not; they are intermediate goods used to make the final good.
Production function expresses
(a) technological relationship between physical inputs and output
(b) the financial relationship between physical inputs and output
(c) relationship between finance and technology
(d) relationship between factors of production
Microeconomics Questions answer is (a)
Production involves transformation of inputs into outputs. The output is a function of input. The functional relationship between physical inputs and physical output of a firm is called production function. The word ‘function’ in mathematics means the precise relationship that exists between one dependent variable and a number (or one) of independent variables. The production function states the maximum quantity of output that can be produced from any given quantities of various inputs during a given period of time.
Extension or contraction of quantity demanded of a commodity is a result of a change in the
(a) the unit price of the commodity
(b) income of the consumer
(c) tastes of the consumer
(d) climate of the region
Solution: (a)
Demand for a commodity refers to the quantity of the commodity that people are willing to purchase at a specific price per unit of time, other factors (such as price of related goods, income, tastes and preferences, advertising, etc) being constant. Demand includes the desire to buy the commodity accompanied by the willingness to buy it and sufficient purchasing power to purchase it. So changes in the unit price of a commodity leads to either extension or contraction in demand. The law of demand states that there is an inverse relationship between quantity demanded of a commodity and its price, other factors being constant. In other words, higher the price, lower the demand and vice versa, other things remaining constant.
The Law of Demand expresses
(a) effect of change in the price of a commodity on its demand
(b) effect of change in demand of a commodity on its price
(c) effect of change in demand of a commodity over the supply of its substitute
(d) None of the above
Microeconomics Questions answer is (a)
The law of demand states the inverse relation that comes to exist of between price in one hand and quantity demanded on the other. The law of demand portrays that demand is the function of price. Price is the key determinant of demand. Fluctuations in price leads to changes in the quantity demanded. In other words, the higher the price of a product, the lower the quantity demanded.
Production function explains the relationship between
(a) initial inputs and ultimate output
(b) inputs and ultimate consumption
(c) output and consumption
(d) output and exports
Microeconomics Questions answer is (a)
Production function explains the relationship between factor input and output under given technology. It explains as to for increasing the output, in which proportion various inputs or factors may be employed under given technological conditions. In short, production function may be defined as a technological relationship that tells the maximum output producible from various combina-tions of inputs. Production function explains the physical relationship between input and output under given technology.
If two commodities are complements, then their cross-price elasticity is
(a) zero
(b) positive
(c) negative
(d) imaginary number
Solution: (c)
In economics, the cross elasticity of demand or cross-price elasticity of demand measures the responsiveness of the demand for a good to a change in the price of another good. It is measured as the percentage change in demand for the first good that occurs in response to a percentage change in price of the second good. A negative cross elasticity denotes two products that are complements, while a positive cross elasticity denotes two substitute products.
Surplus earned by a factor other than land in a short period of referred to as
(a) economic rent
(b) net rent
(c) quasi-rent
(d) super-normal rent
Microeconomics Questions answer is (c)
Quasi-rent is the surplus which is received in the short period because of demand exceeding the supply by the man made factors besides land. It is an analytical term in economics, for the income earned, in excess of post-investment opportunity cost, by a sunk cost investment. In general, an economic rent is the difference between the income from a factor of production in a particular use, and either the cost of bringing the factor into economic use (Classical factor rent), or the opportunity cost of using the factor, where opportunity cost is defined as the current income minus the income available in the next best use.
Labour Intensive Technique would get chosen in a
(a) Labour Surplus Economy
(b) Capital Surplus Economy
(c) Developed Economy
(d) Developing Economy
Microeconomics Questions answer is (a)
‘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: wages and other benefits, recruitment, training and so on. Labour intensive processes are more likely to be seen in Job production and in smaller-scale enterprises.
Price theory is also known as
(a) Macro Economics
(b) Development Economics
(c) Public Economics
(d) Micro Economics
Microeconomics Questions answer is (d)
Price theory is also known as microeconomics and is concerned with the economic behaviour of individual consumers, producers and resource owners. Prof. Leftwich defines Price Theory as “it is concerned with the flow of goods and services from business firms to consumers, the composition of flow and the evaluation of pricing of the component parts of the flow. It is concerned too with the flow of productive resources (or their services) from resource owners to business firms with their evaluation and with their allocation among alternative uses.”
