[1] The tax levied on gross sales revenue from business transactions is called -
A.
Turnover Tax
B.
Sales Tax
C.
Capital Gains Tax
D.
Corporation Tax
Ans:
Turnover Tax
Explanation :
A turnover tax is similar to a sales tax or a VAT, with the difference that it taxes intermediate and possibly capital goods. It is charged on gross sales revenue from business transactions. Unlike a sales tax, which is levied only on gross value at the point of retail sale, a turnover tax is levied on all intermediate transactions between businesses leading to and including the final sale.
[2] Ad Valorem tax is levied -
A.
according to value added by the Government.
B.
according to value addition to a commodity
C.
according to value given by producers
D.
according to value added by the finance ministry
Ans:
according to value given by producers
Explanation :
An ad valorem tax (Latin for "according to value") is a tax based on the value of real estate or personal property. It is more common than a specific tax, a tax based on the quantity of an item, such as cents per kilogram, regardless of price. It is levied on the basis of value given by producers. So sometimes, the primary difficulty with such taxation, especially in the case of tariffs, is in establishing a satisfactory value figure.
[3] Equilibrium price means -
A.
Price determined by demand and supply
B.
Price determined by Cost and Profit
C.
Price determined by Cost of production
D.
Price determined to maximize profit
Ans:
Price determined by demand and supply
Explanation :
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 stale of equilibrium. In short, it is the market price at which the supply of an item equals the quantity demanded.
[4] Opportunity cost of production of a commodity is -
A.
the cost that the firm could have Incurred when a different technique was adopted
B.
the cost that the firm could have incurred under a different method of production
C.
the actual cost incurred
D.
the next best alternative output
Ans:
the next best alternative output
Explanation :
The concept of opportunity cost is based on scarcity and choice. The opportunity cost of a commodity is the next best alternative commodity sacrificed. In other words opportunity cost of a commodity is forgoing the opportunity to produce alternative goods and services. If one commodity is produced another commodity is sacrificed.
[5] Surplus earned by a factor other than land in the short period of referred to as-
A.
economic rent
B.
net rent
C.
quasi-rent
D.
super-normal rent
Ans:
quasi-rent
Explanation :
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.
[6] If the change in demand for a commodity is at a faster rate than change in the price of the commodity, the demand is -
A.
perfectly inelastic
B.
elastic
C.
perfectly elastic
D.
inelastic
Ans:
perfectly elastic
Explanation :
If quantity demanded changes by a very large percentage as a result of a tiny percentage change in price, then the demand is said to be perfectly elastic. It reflects the fact that quantity demanded is extremely responsive to even a small change in price. Technically, the elasticity in this extreme case would be undefined but it approaches negative infinity as demand becomes more elastic.
[7] Which of the following are not fixed costs?
A.
Rent on land
B.
Municipal taxes
C.
Wages paid to workers
D.
Insurance charges
Ans:
Wages paid to workers
Explanation :
In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. For some employees, salary is paid on monthly rates, independent of how many hours the employees work. This is a fixed cost. On the other hand, the hours of hourly employees paid in wages, can often be varied, so this type of labour cost is a variable cost.
[8] Cost of production of the producer is given by:
A.
sum of wages paid to labourers.
B.
sum of wages and interest paid on capital.
C.
sum of wages, interest, rent and supernormal profit.
D.
sum of wages, interest, rent and normal profit.
Ans:
sum of wages, interest, rent and normal profit.
Explanation :
The following elements are included in the cost of production: (a) Purchase of raw machinery, (b) Installation of plant and machinery, (c) Wages of labor, (d) Rent of Building, (e) Interest on capital, (f) Wear and tear of the machinery and building, (g) Advertisement expenses, (h) Insurance charges, (i) Payment of taxes. (j) In the cost of production, the imputed value of the factor of production owned by the firm itself is also added, (k) The normal profit of the entrepreneur is also included In the cost of production.
[9] The market price is related to :
A.
very short period
B.
short period
C.
long period
D.
very long period
Ans:
very short period
Explanation :
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 clays 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.
[10] The demand for necessities is -
A.
elastic
B.
perfectly inelastic
C.
inelastic
D.
perfectly elastic
Ans:
perfectly inelastic
Explanation :
Inelastic demand means that if the price changes, the quantity demanded will not change much. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand.
[11] If a good has negative income elasticity and positive price elasticity of demand, it is a -
A.
giffen good
B.
normal good
C.
superior good
D.
an inferior good
Ans:
giffen good
Explanation :
A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up.
[12] A unit price elastic demand curve will touch -
A.
both price and quantity axis
B.
neither price axis, nor quantity axis
C.
only price axis
D.
only quantity axis
Ans:
neither price axis, nor quantity axis
Explanation :
Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis.
[13] If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be -
A.
less than unity
B.
infinitely large
C.
greater than unity
D.
equal to unity
Ans:
equal to unity
Explanation :
Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
[14] According to Modern Theory of Rent, rent accrues to -
A.
capital only
B.
any factor
C.
labour only
D.
land only
Ans:
any factor
Explanation :
Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
[15] As the number of investments made by a firm increases, its internal rate of return -
A.
declines due to diminishing marginal productivity.
B.
declines because the market rate of interest will fall, ceteris paribus.
C.
increases to compensate the firm for the current consumption foregone.
D.
increases because the level of savings will fall.
Ans:
increases to compensate the firm for the current consumption foregone.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
A turnover tax is similar to a sales tax or a VAT, with the difference that it taxes intermediate and possibly capital goods. It is charged on gross sales revenue from business transactions. Unlike a sales tax, which is levied only on gross value at the point of retail sale, a turnover tax is levied on all intermediate transactions between businesses leading to and including the final sale.
[2] Ad Valorem tax is levied -
A.
according to value added by the Government.
B.
according to value addition to a commodity
C.
according to value given by producers
D.
according to value added by the finance ministry
Ans:
according to value given by producers
Explanation :
An ad valorem tax (Latin for "according to value") is a tax based on the value of real estate or personal property. It is more common than a specific tax, a tax based on the quantity of an item, such as cents per kilogram, regardless of price. It is levied on the basis of value given by producers. So sometimes, the primary difficulty with such taxation, especially in the case of tariffs, is in establishing a satisfactory value figure.
[3] Equilibrium price means -
A.
Price determined by demand and supply
B.
Price determined by Cost and Profit
C.
Price determined by Cost of production
D.
Price determined to maximize profit
Ans:
Price determined by demand and supply
Explanation :
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 stale of equilibrium. In short, it is the market price at which the supply of an item equals the quantity demanded.
[4] Opportunity cost of production of a commodity is -
A.
the cost that the firm could have Incurred when a different technique was adopted
B.
the cost that the firm could have incurred under a different method of production
C.
the actual cost incurred
D.
the next best alternative output
Ans:
the next best alternative output
Explanation :
The concept of opportunity cost is based on scarcity and choice. The opportunity cost of a commodity is the next best alternative commodity sacrificed. In other words opportunity cost of a commodity is forgoing the opportunity to produce alternative goods and services. If one commodity is produced another commodity is sacrificed.
[5] Surplus earned by a factor other than land in the short period of referred to as-
A.
economic rent
B.
net rent
C.
quasi-rent
D.
super-normal rent
Ans:
quasi-rent
Explanation :
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.
[6] If the change in demand for a commodity is at a faster rate than change in the price of the commodity, the demand is -
A.
perfectly inelastic
B.
elastic
C.
perfectly elastic
D.
inelastic
Ans:
perfectly elastic
Explanation :
If quantity demanded changes by a very large percentage as a result of a tiny percentage change in price, then the demand is said to be perfectly elastic. It reflects the fact that quantity demanded is extremely responsive to even a small change in price. Technically, the elasticity in this extreme case would be undefined but it approaches negative infinity as demand becomes more elastic.
[7] Which of the following are not fixed costs?
A.
Rent on land
B.
Municipal taxes
C.
Wages paid to workers
D.
Insurance charges
Ans:
Wages paid to workers
Explanation :
In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. For some employees, salary is paid on monthly rates, independent of how many hours the employees work. This is a fixed cost. On the other hand, the hours of hourly employees paid in wages, can often be varied, so this type of labour cost is a variable cost.
[8] Cost of production of the producer is given by:
A.
sum of wages paid to labourers.
B.
sum of wages and interest paid on capital.
C.
sum of wages, interest, rent and supernormal profit.
D.
sum of wages, interest, rent and normal profit.
Ans:
sum of wages, interest, rent and normal profit.
Explanation :
The following elements are included in the cost of production: (a) Purchase of raw machinery, (b) Installation of plant and machinery, (c) Wages of labor, (d) Rent of Building, (e) Interest on capital, (f) Wear and tear of the machinery and building, (g) Advertisement expenses, (h) Insurance charges, (i) Payment of taxes. (j) In the cost of production, the imputed value of the factor of production owned by the firm itself is also added, (k) The normal profit of the entrepreneur is also included In the cost of production.
[9] The market price is related to :
A.
very short period
B.
short period
C.
long period
D.
very long period
Ans:
very short period
Explanation :
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 clays 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.
[10] The demand for necessities is -
A.
elastic
B.
perfectly inelastic
C.
inelastic
D.
perfectly elastic
Ans:
perfectly inelastic
Explanation :
Inelastic demand means that if the price changes, the quantity demanded will not change much. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand.
[11] If a good has negative income elasticity and positive price elasticity of demand, it is a -
A.
giffen good
B.
normal good
C.
superior good
D.
an inferior good
Ans:
giffen good
Explanation :
A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up.
[12] A unit price elastic demand curve will touch -
A.
both price and quantity axis
B.
neither price axis, nor quantity axis
C.
only price axis
D.
only quantity axis
Ans:
neither price axis, nor quantity axis
Explanation :
Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis.
[13] If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be -
A.
less than unity
B.
infinitely large
C.
greater than unity
D.
equal to unity
Ans:
equal to unity
Explanation :
Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
[14] According to Modern Theory of Rent, rent accrues to -
A.
capital only
B.
any factor
C.
labour only
D.
land only
Ans:
any factor
Explanation :
Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
[15] As the number of investments made by a firm increases, its internal rate of return -
A.
declines due to diminishing marginal productivity.
B.
declines because the market rate of interest will fall, ceteris paribus.
C.
increases to compensate the firm for the current consumption foregone.
D.
increases because the level of savings will fall.
Ans:
increases to compensate the firm for the current consumption foregone.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
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 stale of equilibrium. In short, it is the market price at which the supply of an item equals the quantity demanded.
[4] Opportunity cost of production of a commodity is -
A.
the cost that the firm could have Incurred when a different technique was adopted
B.
the cost that the firm could have incurred under a different method of production
C.
the actual cost incurred
D.
the next best alternative output
Ans:
the next best alternative output
Explanation :
The concept of opportunity cost is based on scarcity and choice. The opportunity cost of a commodity is the next best alternative commodity sacrificed. In other words opportunity cost of a commodity is forgoing the opportunity to produce alternative goods and services. If one commodity is produced another commodity is sacrificed.
[5] Surplus earned by a factor other than land in the short period of referred to as-
A.
economic rent
B.
net rent
C.
quasi-rent
D.
super-normal rent
Ans:
quasi-rent
Explanation :
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.
[6] If the change in demand for a commodity is at a faster rate than change in the price of the commodity, the demand is -
A.
perfectly inelastic
B.
elastic
C.
perfectly elastic
D.
inelastic
Ans:
perfectly elastic
Explanation :
If quantity demanded changes by a very large percentage as a result of a tiny percentage change in price, then the demand is said to be perfectly elastic. It reflects the fact that quantity demanded is extremely responsive to even a small change in price. Technically, the elasticity in this extreme case would be undefined but it approaches negative infinity as demand becomes more elastic.
[7] Which of the following are not fixed costs?
A.
Rent on land
B.
Municipal taxes
C.
Wages paid to workers
D.
Insurance charges
Ans:
Wages paid to workers
Explanation :
In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. For some employees, salary is paid on monthly rates, independent of how many hours the employees work. This is a fixed cost. On the other hand, the hours of hourly employees paid in wages, can often be varied, so this type of labour cost is a variable cost.
[8] Cost of production of the producer is given by:
A.
sum of wages paid to labourers.
B.
sum of wages and interest paid on capital.
C.
sum of wages, interest, rent and supernormal profit.
D.
sum of wages, interest, rent and normal profit.
Ans:
sum of wages, interest, rent and normal profit.
Explanation :
The following elements are included in the cost of production: (a) Purchase of raw machinery, (b) Installation of plant and machinery, (c) Wages of labor, (d) Rent of Building, (e) Interest on capital, (f) Wear and tear of the machinery and building, (g) Advertisement expenses, (h) Insurance charges, (i) Payment of taxes. (j) In the cost of production, the imputed value of the factor of production owned by the firm itself is also added, (k) The normal profit of the entrepreneur is also included In the cost of production.
[9] The market price is related to :
A.
very short period
B.
short period
C.
long period
D.
very long period
Ans:
very short period
Explanation :
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 clays 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.
[10] The demand for necessities is -
A.
elastic
B.
perfectly inelastic
C.
inelastic
D.
perfectly elastic
Ans:
perfectly inelastic
Explanation :
Inelastic demand means that if the price changes, the quantity demanded will not change much. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand.
[11] If a good has negative income elasticity and positive price elasticity of demand, it is a -
A.
giffen good
B.
normal good
C.
superior good
D.
an inferior good
Ans:
giffen good
Explanation :
A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up.
[12] A unit price elastic demand curve will touch -
A.
both price and quantity axis
B.
neither price axis, nor quantity axis
C.
only price axis
D.
only quantity axis
Ans:
neither price axis, nor quantity axis
Explanation :
Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis.
[13] If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be -
A.
less than unity
B.
infinitely large
C.
greater than unity
D.
equal to unity
Ans:
equal to unity
Explanation :
Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
[14] According to Modern Theory of Rent, rent accrues to -
A.
capital only
B.
any factor
C.
labour only
D.
land only
Ans:
any factor
Explanation :
Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
[15] As the number of investments made by a firm increases, its internal rate of return -
A.
declines due to diminishing marginal productivity.
B.
declines because the market rate of interest will fall, ceteris paribus.
C.
increases to compensate the firm for the current consumption foregone.
D.
increases because the level of savings will fall.
Ans:
increases to compensate the firm for the current consumption foregone.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
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.
[6] If the change in demand for a commodity is at a faster rate than change in the price of the commodity, the demand is -
A.
perfectly inelastic
B.
elastic
C.
perfectly elastic
D.
inelastic
Ans:
perfectly elastic
Explanation :
If quantity demanded changes by a very large percentage as a result of a tiny percentage change in price, then the demand is said to be perfectly elastic. It reflects the fact that quantity demanded is extremely responsive to even a small change in price. Technically, the elasticity in this extreme case would be undefined but it approaches negative infinity as demand becomes more elastic.
[7] Which of the following are not fixed costs?
A.
Rent on land
B.
Municipal taxes
C.
Wages paid to workers
D.
Insurance charges
Ans:
Wages paid to workers
Explanation :
In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. For some employees, salary is paid on monthly rates, independent of how many hours the employees work. This is a fixed cost. On the other hand, the hours of hourly employees paid in wages, can often be varied, so this type of labour cost is a variable cost.
[8] Cost of production of the producer is given by:
A.
sum of wages paid to labourers.
B.
sum of wages and interest paid on capital.
C.
sum of wages, interest, rent and supernormal profit.
D.
sum of wages, interest, rent and normal profit.
Ans:
sum of wages, interest, rent and normal profit.
Explanation :
The following elements are included in the cost of production: (a) Purchase of raw machinery, (b) Installation of plant and machinery, (c) Wages of labor, (d) Rent of Building, (e) Interest on capital, (f) Wear and tear of the machinery and building, (g) Advertisement expenses, (h) Insurance charges, (i) Payment of taxes. (j) In the cost of production, the imputed value of the factor of production owned by the firm itself is also added, (k) The normal profit of the entrepreneur is also included In the cost of production.
[9] The market price is related to :
A.
very short period
B.
short period
C.
long period
D.
very long period
Ans:
very short period
Explanation :
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 clays 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.
[10] The demand for necessities is -
A.
elastic
B.
perfectly inelastic
C.
inelastic
D.
perfectly elastic
Ans:
perfectly inelastic
Explanation :
Inelastic demand means that if the price changes, the quantity demanded will not change much. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand.
[11] If a good has negative income elasticity and positive price elasticity of demand, it is a -
A.
giffen good
B.
normal good
C.
superior good
D.
an inferior good
Ans:
giffen good
Explanation :
A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up.
[12] A unit price elastic demand curve will touch -
A.
both price and quantity axis
B.
neither price axis, nor quantity axis
C.
only price axis
D.
only quantity axis
Ans:
neither price axis, nor quantity axis
Explanation :
Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis.
[13] If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be -
A.
less than unity
B.
infinitely large
C.
greater than unity
D.
equal to unity
Ans:
equal to unity
Explanation :
Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
[14] According to Modern Theory of Rent, rent accrues to -
A.
capital only
B.
any factor
C.
labour only
D.
land only
Ans:
any factor
Explanation :
Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
[15] As the number of investments made by a firm increases, its internal rate of return -
A.
declines due to diminishing marginal productivity.
B.
declines because the market rate of interest will fall, ceteris paribus.
C.
increases to compensate the firm for the current consumption foregone.
D.
increases because the level of savings will fall.
Ans:
increases to compensate the firm for the current consumption foregone.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. For some employees, salary is paid on monthly rates, independent of how many hours the employees work. This is a fixed cost. On the other hand, the hours of hourly employees paid in wages, can often be varied, so this type of labour cost is a variable cost.
[8] Cost of production of the producer is given by:
A.
sum of wages paid to labourers.
B.
sum of wages and interest paid on capital.
C.
sum of wages, interest, rent and supernormal profit.
D.
sum of wages, interest, rent and normal profit.
Ans:
sum of wages, interest, rent and normal profit.
Explanation :
The following elements are included in the cost of production: (a) Purchase of raw machinery, (b) Installation of plant and machinery, (c) Wages of labor, (d) Rent of Building, (e) Interest on capital, (f) Wear and tear of the machinery and building, (g) Advertisement expenses, (h) Insurance charges, (i) Payment of taxes. (j) In the cost of production, the imputed value of the factor of production owned by the firm itself is also added, (k) The normal profit of the entrepreneur is also included In the cost of production.
[9] The market price is related to :
A.
very short period
B.
short period
C.
long period
D.
very long period
Ans:
very short period
Explanation :
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 clays 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.
[10] The demand for necessities is -
A.
elastic
B.
perfectly inelastic
C.
inelastic
D.
perfectly elastic
Ans:
perfectly inelastic
Explanation :
Inelastic demand means that if the price changes, the quantity demanded will not change much. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand.
[11] If a good has negative income elasticity and positive price elasticity of demand, it is a -
A.
giffen good
B.
normal good
C.
superior good
D.
an inferior good
Ans:
giffen good
Explanation :
A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up.
[12] A unit price elastic demand curve will touch -
A.
both price and quantity axis
B.
neither price axis, nor quantity axis
C.
only price axis
D.
only quantity axis
Ans:
neither price axis, nor quantity axis
Explanation :
Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis.
[13] If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be -
A.
less than unity
B.
infinitely large
C.
greater than unity
D.
equal to unity
Ans:
equal to unity
Explanation :
Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
[14] According to Modern Theory of Rent, rent accrues to -
A.
capital only
B.
any factor
C.
labour only
D.
land only
Ans:
any factor
Explanation :
Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
[15] As the number of investments made by a firm increases, its internal rate of return -
A.
declines due to diminishing marginal productivity.
B.
declines because the market rate of interest will fall, ceteris paribus.
C.
increases to compensate the firm for the current consumption foregone.
D.
increases because the level of savings will fall.
Ans:
increases to compensate the firm for the current consumption foregone.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
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 clays 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.
[10] The demand for necessities is -
A.
elastic
B.
perfectly inelastic
C.
inelastic
D.
perfectly elastic
Ans:
perfectly inelastic
Explanation :
Inelastic demand means that if the price changes, the quantity demanded will not change much. The more necessary a good is, the lower the elasticity, as people will attempt to buy it no matter the price. Necessities such as water are likely to have perfectly inelastic demand.
[11] If a good has negative income elasticity and positive price elasticity of demand, it is a -
A.
giffen good
B.
normal good
C.
superior good
D.
an inferior good
Ans:
giffen good
Explanation :
A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up.
[12] A unit price elastic demand curve will touch -
A.
both price and quantity axis
B.
neither price axis, nor quantity axis
C.
only price axis
D.
only quantity axis
Ans:
neither price axis, nor quantity axis
Explanation :
Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis.
[13] If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be -
A.
less than unity
B.
infinitely large
C.
greater than unity
D.
equal to unity
Ans:
equal to unity
Explanation :
Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
[14] According to Modern Theory of Rent, rent accrues to -
A.
capital only
B.
any factor
C.
labour only
D.
land only
Ans:
any factor
Explanation :
Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
[15] As the number of investments made by a firm increases, its internal rate of return -
A.
declines due to diminishing marginal productivity.
B.
declines because the market rate of interest will fall, ceteris paribus.
C.
increases to compensate the firm for the current consumption foregone.
D.
increases because the level of savings will fall.
Ans:
increases to compensate the firm for the current consumption foregone.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
A negative income elasticity of demand is associated with inferior goods. The Giffen good is an unusual type of inferior good which has positive price elasticity of demand. It is a good which people paradoxically consume more of as the price rises, violating the law of demand. When price goes up, the quantity demanded also goes up.
[12] A unit price elastic demand curve will touch -
A.
both price and quantity axis
B.
neither price axis, nor quantity axis
C.
only price axis
D.
only quantity axis
Ans:
neither price axis, nor quantity axis
Explanation :
Unit elastic refers to an elasticity alternative in which any percentage change in price cause an equal percentage change in quantity. In other words, any change in price, whether big or small, triggers exactly the same percentage change in quantity. However, the unit price elastic demand curve does not touch either price axis or quantity axis.
[13] If the supply curve is a straight line passing through the origin, then the price elasticity of supply will be -
A.
less than unity
B.
infinitely large
C.
greater than unity
D.
equal to unity
Ans:
equal to unity
Explanation :
Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
[14] According to Modern Theory of Rent, rent accrues to -
A.
capital only
B.
any factor
C.
labour only
D.
land only
Ans:
any factor
Explanation :
Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
[15] As the number of investments made by a firm increases, its internal rate of return -
A.
declines due to diminishing marginal productivity.
B.
declines because the market rate of interest will fall, ceteris paribus.
C.
increases to compensate the firm for the current consumption foregone.
D.
increases because the level of savings will fall.
Ans:
increases to compensate the firm for the current consumption foregone.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
Any straight line supply curve passing through the origin has an elasticity of supply equal to 1. The different types of price elasticity of supply are listed below:
[14] According to Modern Theory of Rent, rent accrues to -
A.
capital only
B.
any factor
C.
labour only
D.
land only
Ans:
any factor
Explanation :
Modern theory of rent does not confine itself to the reward of only land as a factor of production as was the case in the classical Ricardian theory of rent. Rent in modern sense can arise in respect of any other factor of production. i.e., labour, capital and entrepreneurship.
[15] As the number of investments made by a firm increases, its internal rate of return -
A.
declines due to diminishing marginal productivity.
B.
declines because the market rate of interest will fall, ceteris paribus.
C.
increases to compensate the firm for the current consumption foregone.
D.
increases because the level of savings will fall.
Ans:
increases to compensate the firm for the current consumption foregone.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. A firm (or individual), in theory, undertakes all projects or investments available with IRRs that exceed the cost of capital. As the number of investments increase, its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital.
[16] The opportunity cost of a factor of production is -
A.
what it is earning in its present use.
B.
what it can earn in the long period.
C.
what has to be paid to retain it in its present use.
D.
what it can earn in some other use.
Ans:
what it can earn in some other use.
Explanation :
The opportunity cost of a choice is the value of the best alternative forgone, in a situation in which a choice needs to be made between several mutually exclusive alternatives given limited resources. It is equivalent to what a factor could earn for the firm in alter-native uses.
[17] The demand for labour is called -
A.
Market demand
B.
Direct demand
C.
Derived demand
D.
Factory demand
Ans:
Derived demand
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[18] Equilibrium price is the price when :
A.
supply is greater than demand
B.
supply is less than demand
C.
demand is very high
D.
supply is equal to demand
Ans:
supply is equal to demand
Explanation :
The equilibrium price is the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s). How the equilibrium price is achieved is through the 'Invisible Hand', or market forces of the economy.
[19] Elasticity of demand measures the responsiveness of the quantity demanded of a 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
Ans:
change in the price of the goods
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
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, a complementary or substitute good.
[20] Product differentiation is the most important feature of -
A.
Pure competition
B.
monopolistic competition
C.
monopoly
D.
oligopoly
Ans:
monopolistic competition
Explanation :
There are six characteristics of monopolistic com-petition (MC): (1) Product differentiation;(2) many firms; (3) Free entry and exit in the long run; (4) Independent decision making; (5) market power; and (0 Buyers and Sellers do not. have perfect information.
[21] Division of labour is the result of -
A.
Complicated work
B.
excessive pressure
C.
excess supply of labour
D.
specialization
Ans:
specialization
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
Division of Labor is the "specialization" of cooperative labor in specific, circumscribed tasks and like roles. It is a process whereby the production process is broken down into a sequence of stages and workers are assigned to particular stages.
[22] Which from the following is not true when the interest rate in the economy goes up?
A.
Saving increases
B.
Lending decreases
C.
Cost of production increases
D.
Return on capital increases
Ans:
Return on capital increases
Explanation :
The interest rate is the cost of demanding or borrowing loanable funds. Alternatively, the interest rate is the rate of return from supplying or lending loanable funds. The demand for loanable funds takes account of the rate of return on capital. The rate of return on capital is the additional revenue that a firm can earn from its employment of new capital. This additional revenue is usually measured as a percentage rate per unit of time, which is why it is called the rate of return on capital.
[23] Labour Intensive Technique would get chosen in a -
A.
Labour Surplus Economy
B.
Capital Surplus Economy
C.
Developed Economy
D.
Developing Economy
Ans:
Labour Surplus Economy
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
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 personalized 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.
[24] When marginal utility is zero, the total utility is -
A.
Minimum
B.
Increasing
C.
Maximum
D.
Decreasing
Ans:
Maximum
Explanation :
Marginal utility measures the extra utility (or satisfaction) from consuming an additional unit of a product. Total utility is the total satisfaction from the consumption of the product. According to the Law of Diminishing Marginal Utility, total utility increases at a diminishing rate. When marginal utility is 0 this means there is no increase in total satisfaction from the consumption of that unit. So the total unit is at maximum.
[25] Operating Surplus arises in the -
A.
Government Sector
B.
Production for self consumption
C.
Subsistence farming
D.
Enterprise Sector
Ans:
Government Sector
Explanation :
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.
Explanation :
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.