Microeconomics MCQ Solution: (a)
Supply curve, in economics, is a graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply. Product price is measured on the vertical axis of the graph and quantity of product supplied on the horizontal axis. In most cases, as when there is increasing returns, the supply curve is drawn as a slope rising upward from left to right, since product price and quantity supplied are directly related (i.e., as the price of a commodity increases in the market, the amount supplied increases).
Who propounded the Innovation theory of profits?
(a) J.A. Schumpeter
(b) P.A. Samuelson
(c) Alfred Marshall
(d) David Ricardo
Microeconomics MCQ Solution: (a)
Schumpeter’s (1934) original theory of innovative profits emphasized the role of entrepreneurship (his term was entrepreneurial profits) and the seeking out of opportunities for novel value-generating activities which would expand (and transform) the circular flow of income. It did so with reference to a distinction between invention or discovery on the one hand and innovation, commercialization and entrepreneurship on the other. This separation of invention and innovation marked out the typical nineteenth century institutional model of innovation, in which independent inventors typically fed discoveries as potential inputs to entrepreneurial firms.
The exploitation of labor is said to exist when
(a) Wage = Marginal Revenue Product
(b) Wage < Marginal Revenue Product
(c) Wage > Marginal Revenue Product
(d) Marginal Revenue Product = 0
Microeconomics MCQ Solution: (b)
The term “exploitation” is used to denote the payment to labor of a wage less than its marginal revenue product. Under monopolistic competition, all factors are exploited in this sense. All firms hire labour until the marginal revenue product equals the marginal factor cost.
The market price is related to:
(a) very short period
(b) short period
(c) long period
(d) very long period
Microeconomics MCQ Solution: (a)
Marshall was the first economist who analyzed the importance of time in price determination. Market period is a very short period in which supply being fixed, price is determined by demand. The time period is of few days or weeks in which the supply of a product can be amplified out of given stock to match the demand. This is possible for durable goods.
The elasticity of demand measures the responsiveness of the quantity demanded of goods to a
(a) change in the price of the goods
(b) change in the price of substitutes
(c) change in the price of the complements
(d) change in the price of joint products
Microeconomics MCQ Solution: (a)
Price elasticity of demand is a measure of responsiveness of the quantity of a good or service demanded to changes in its price. This measure of elasticity is sometimes referred to as the own-price elasticity of demand for a good, i.e., the elasticity of demand with respect to the good’s own price, in order to distinguish it from the elasticity of demand for that good with respect to the change in the price of some other good, i.e., a complementary or substitute good.
In which market structure is the demand curve of the market represented by the demand curve of the firm?
(a) Monopoly
(b) Oligopoly
(c) Duopoly
(d) Perfect Competition
Microeconomics MCQ Solution: (a)
Because the monopolist is the market’s only supplier, the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.
Which one of the following is having elastic demand?
(a) Electricity
(b) Medicines
(c) Rice
(d) Matchboxes
Microeconomics MCQ Solution: (a)
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
The marginal propensity to consume lies between
(a) 0 to 1
(b) 0 to ¥
(c) 1 to ¥
(d) ¥ to ¥
Microeconomics MCQ Solution: (a)
The Marginal Propensity to Consume (MPC) is measured as the ratio of the change in consumption to the change in income, thus giving us a figure between 0 and 1. The MPC can be more than one if the subject borrowed money to finance expenditures higher than their income. One minus the MPC equals the marginal propensity to save.
The expenses on advertising are called
(a) Implicit cost
(b) Surplus cost
(c) Fixed cost
(d) Selling cost
Microeconomics MCQ Solution: (d)
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
The supply of labor in the economy depends on
(a) Population
(b) National income
(c) Per capita income
(d) Natural resources
Microeconomics MCQ Solution: (a)
The supply curve for labor depends on variables such as population, wage rates, etc. in developing countries, the vast population base explains the relatively lower wage rates and easy accessibility to labour supply. This is just the opposite in the case of developed countries.
