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MCQs

Total Questions : 230 | Page 3 of 23 pages
Question 21. Bread and butter, car and petrol are examples of goods which have
  1.    autonomous demand
  2.    composite demand
  3.    joint demand
  4.    derived demand
 Discuss Question
Answer: Option D. -> derived demand
Answer: (d)
Derived demand is a term in economics, where demand for one good or service occurs as a result of the demand for another intermediate/final good or service. This may occur as the former is a part of the production of the second.
For example, demand for coal leads to derived demand for mining, as coal must be mined for coal to be consumed.
As the demand for coal increases, so does its price.
Question 22. Which of the following statements is correct ?
  1.    Economic rent is the amount one must pay to enter a desirable labour market.
  2.    Most workers will work for less than their reservation wage.
  3.    The reservation wage is the maximum amount any firm will pay for a worker.
  4.    Economic rent is the difference between the market wage and the reservation wage.
 Discuss Question
Answer: Option D. -> Economic rent is the difference between the market wage and the reservation wage.
Answer: (d)
The difference between the actual market wage and the reservation wage is called economic rent.
Therefore, the lower a person’s reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any person becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny, p. 58).
Question 23. A market in which there are a few number of large firms is called as
  1.    Monopoly
  2.    Duopoly
  3.    Competition
  4.    Oligopoly
 Discuss Question
Answer: Option D. -> Oligopoly
Answer: (d)
Duopoly means a market in which two producers of the same good are predominantly powerful. In some theories, the term is used specifically to denote the existence of only two suppliers of a good.
Competition refers to a condition in a market in which firms are attempting to increase their profits at the expense of their rivals.
Oligopoly refers to a market that is dominated by a few firms producing differentiated products.
Monopoly refers to a market in which there is only one supplier and no other firms are able to enter. According to the Fair Trading Act, 1973, a Monopoly is defined as any firm (or group of firms acting together) that accounts for 25 per cent or more of the market output of a good or service.
Question 24. The remuneration of the entrepreneur in production is
  1.    Super-normal profit
  2.    Pure profit
  3.    Gross profit
  4.    Net profit
 Discuss Question
Answer: Option D. -> Net profit
Answer: (d)
Economists divide the factors of production into four categories: land, labour, capital, and entrepreneurship. An entrepreneur is a person who combines the other factors of production – land, labour, and capital – to earn a profit.
His profit is in the form of Net Profit which is achieved by deducting other elements (such as planning the production, producing the commodities on the basis of demand, looking after efficient distribution) from the gross profit.
Question 25. When percentage change in demand for a commodity is less than percentage change in its price, then demand is said to be
  1.    Perfectly inelastic
  2.    Highly elastic
  3.    Inelastic
  4.    Relatively elastic
 Discuss Question
Answer: Option C. -> Inelastic
Answer: (c)
When the percentage change in quantity demanded is less than the percentage change in price, then the demand for the commodity is said to be inelastic.
Price elasticity of demand refers to the degree of responsiveness of quantity demanded to change in price.
Question 26. Who propounded the Innovation theory of profits ?
  1.    David Ricardo
  2.    J.A. Schumpeter
  3.    P.A. Samuelson
  4.    Alfred Marshall
 Discuss Question
Answer: Option B. -> J.A. Schumpeter
Answer: (b)
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.
Question 27. Exploitation of labour is said to exist when
  1.    Marginal Revenue Product = 0
  2.    Wage = Marginal Revenue Product
  3.    Wage < Marginal Revenue Product
  4.    Wage > Marginal Revenue Product
 Discuss Question
Answer: Option C. -> Wage < Marginal Revenue Product
Answer: (c)
The term "exploitation" is used to denote the payment to labour 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.
Question 28. An increase in the quantity supplied suggests :
  1.    a rightward shift of the supply curve
  2.    a leftward shift of the supply curve
  3.    a movement up along the supply curve
  4.    a movement down along the supply curve
 Discuss Question
Answer: Option C. -> a movement up along the supply curve
Answer: (c)
Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope.
This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.
Question 29. In the law of demand, the statement “Other things remain constant” means
  1.    All of the above
  2.    income of consumer should not change
  3.    price of other goods should not change
  4.    taste of consumer should not change
 Discuss Question
Answer: Option A. -> All of the above
Answer: (a)
In economics, the law of demand is an economic law, which states that consumers buy more of a good when its price is lower and less when its price is higher (ceteris paribus).
The Law of demand states that the quantity demanded and the price of a commodity are inversely related, other things remaining constant.
That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in the number of goods demanded by the consumer will be negatively correlated to the change in the price of the good.
Question 30. Subsidies are payment by government to
  1.    Retired persons
  2.    Consuming units
  3.    Producing units
  4.    Banking units
 Discuss Question
Answer: Option C. -> Producing units
Answer: (c)
A subsidy is essentially a payment by the government to suppliers/producers that reduce their costs of production and encourages them to increase output.
Examples include a guaranteed payment on the factor cost of a product –
e.g. a guaranteed minimum price offered to farmers; an input subsidy that subsidizes the cost of inputs used in production, etc. However, subsidies can be given to consuming units as well. Either way, it benefits the end-user or consumer.

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