[1] Which one of the following is not a feature of monopoly?
A.
Single seller of the product
B.
Heavy selling costs
C.
Barriers to entry of new firms
D.
Price discriminations
Ans:
Heavy selling costs
Explanation :
Heavy selling cost is one of the defining features of an oligopoly. Firms resort to heavy selling cost to attract customers. Under this market form, the firms have to compete to promote their sale by largely homogenous products, differentiated mainly by heavy advertising and promotional expenditure that ultimately adds to the total selling cost.
[2] The supply of labour in the market depends on -
A.
the proportion of the population in the labour force
B.
the number of person hours put in by each person
C.
the size of population
D.
All the above
Ans:
All the above
Explanation :
Supply of labour in an economy depends upon both economic as well as non-economic factors. It depends upon the size of population, the number of workers available for work out of a given population, the number of hours worked, the intensity of work, the skills of workers, their willingness to work and the mobility of labour.
[3] Engel's Law states the relationship between -
A.
quantity demanded and price of a commodity
B.
quantity demanded and price of substitutes
C.
quantity demanded and tastes of the consumers
D.
quantity demanded and income of the consumers
Ans:
quantity demanded and income of the consumers
Explanation :
Engel's law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. In other words, the income elasticity of demand of food is between 0 and 1. Engel's Law doesn't imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products (in % terms) less than their increases in income.
[4] The demand curve for a Giffen good is -
A.
upward rising
B.
downward falling
C.
parallel to the quantity axis
D.
parallel to the price axis
Ans:
upward rising
Explanation :
A Giffen good is a good whose consumption increases as its price increase. (For a normal good, as the price increases, consumption decreases.) Thus, the demand curve will be upward instead of down-ward sloping. A Giffen good has an upward sloping demand curve because it is exceptionally inferior. It has a strong negative income elasticity of demand such that when a price changes the income effect outweighs the substitution effect and this leads to perverse demand curve.
[5] If the price of Pepsi decreases relative to the price of Coke and 7-Up, the demand for -
A.
Coke will decrease
B.
7-Up will decrease
C.
Coke and 7-Up will increase
D.
Coke and 7-Up will decrease
Ans:
Coke and 7-Up will decrease
Explanation :
Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. A decrease in the price of a good normally results in an increase in the quantity demanded by consumers because of the law of demand, and conversely, quantity demanded decreases when price rises. So, here the decrease in price of Pepsi will increase in demand for it, while the demand for Coke and 7-Up will decrease because of no change in their price level.
[6] The demand curve shows that price and quantity demanded are -
A.
directly related only
B.
directly proportional and also directly related
C.
inversely proportional and aslo inversely related
D.
inversely related only
Ans:
inversely proportional and aslo inversely related
Explanation :
Law of demand states that consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good.
[7] If the main objective of the government is to raise revenue, it should tax commodities with -
A.
high elasticity of demand
B.
low elasticity of supply
C.
low elasticity of demand
D.
high income elasticity of demand
Ans:
low elasticity of demand
Explanation :
The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand. However, low-income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people. Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable.
[8] Monopoly means -
A.
single buyer
B.
many sellers
C.
single seller
D.
many buyers
Ans:
single seller
Explanation :
A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity, This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods
[9] Kinked demand curve is a feature of -
A.
Monopoly
B.
Oligopoly
C.
Monopsony
D.
Duopoly
Ans:
Oligopoly
Explanation :
The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
[10] Demand for complementary goods is known as -
A.
Joint demand
B.
Derived demand
C.
Direct demand
D.
Cross demand
Ans:
Joint demand
Explanation :
Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other.
[11] Quasi rent is a phenomenon.
A.
medium term
B.
long term
C.
short term
D.
no time
Ans:
short term
Explanation :
Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.
[12] Which of the following economists is called the Father of Economics?
A.
Malthus
B.
Robinson
C.
Ricardo
D.
Adam Smith
Ans:
Adam Smith
Explanation :
Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the "father of modern economics." He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.
[13] Perfectly inelastic demand is equal to :
A.
One
B.
Infinite
C.
Zero
D.
Greater than one
Ans:
Zero
Explanation :
Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
[14] A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to -
A.
Zero
B.
One
C.
Less than one
D.
Infinity
Ans:
Infinity
Explanation :
Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
[15] 'Capital gains' refers to goods which -
A.
serve as a source of raising further capital
B.
help in the further production of goods
C.
directly go into the satisfaction of human wants
D.
find multiple uses
Ans:
help in the further production of goods
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Heavy selling cost is one of the defining features of an oligopoly. Firms resort to heavy selling cost to attract customers. Under this market form, the firms have to compete to promote their sale by largely homogenous products, differentiated mainly by heavy advertising and promotional expenditure that ultimately adds to the total selling cost.
[2] The supply of labour in the market depends on -
A.
the proportion of the population in the labour force
B.
the number of person hours put in by each person
C.
the size of population
D.
All the above
Ans:
All the above
Explanation :
Supply of labour in an economy depends upon both economic as well as non-economic factors. It depends upon the size of population, the number of workers available for work out of a given population, the number of hours worked, the intensity of work, the skills of workers, their willingness to work and the mobility of labour.
[3] Engel's Law states the relationship between -
A.
quantity demanded and price of a commodity
B.
quantity demanded and price of substitutes
C.
quantity demanded and tastes of the consumers
D.
quantity demanded and income of the consumers
Ans:
quantity demanded and income of the consumers
Explanation :
Engel's law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. In other words, the income elasticity of demand of food is between 0 and 1. Engel's Law doesn't imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products (in % terms) less than their increases in income.
[4] The demand curve for a Giffen good is -
A.
upward rising
B.
downward falling
C.
parallel to the quantity axis
D.
parallel to the price axis
Ans:
upward rising
Explanation :
A Giffen good is a good whose consumption increases as its price increase. (For a normal good, as the price increases, consumption decreases.) Thus, the demand curve will be upward instead of down-ward sloping. A Giffen good has an upward sloping demand curve because it is exceptionally inferior. It has a strong negative income elasticity of demand such that when a price changes the income effect outweighs the substitution effect and this leads to perverse demand curve.
[5] If the price of Pepsi decreases relative to the price of Coke and 7-Up, the demand for -
A.
Coke will decrease
B.
7-Up will decrease
C.
Coke and 7-Up will increase
D.
Coke and 7-Up will decrease
Ans:
Coke and 7-Up will decrease
Explanation :
Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. A decrease in the price of a good normally results in an increase in the quantity demanded by consumers because of the law of demand, and conversely, quantity demanded decreases when price rises. So, here the decrease in price of Pepsi will increase in demand for it, while the demand for Coke and 7-Up will decrease because of no change in their price level.
[6] The demand curve shows that price and quantity demanded are -
A.
directly related only
B.
directly proportional and also directly related
C.
inversely proportional and aslo inversely related
D.
inversely related only
Ans:
inversely proportional and aslo inversely related
Explanation :
Law of demand states that consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good.
[7] If the main objective of the government is to raise revenue, it should tax commodities with -
A.
high elasticity of demand
B.
low elasticity of supply
C.
low elasticity of demand
D.
high income elasticity of demand
Ans:
low elasticity of demand
Explanation :
The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand. However, low-income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people. Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable.
[8] Monopoly means -
A.
single buyer
B.
many sellers
C.
single seller
D.
many buyers
Ans:
single seller
Explanation :
A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity, This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods
[9] Kinked demand curve is a feature of -
A.
Monopoly
B.
Oligopoly
C.
Monopsony
D.
Duopoly
Ans:
Oligopoly
Explanation :
The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
[10] Demand for complementary goods is known as -
A.
Joint demand
B.
Derived demand
C.
Direct demand
D.
Cross demand
Ans:
Joint demand
Explanation :
Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other.
[11] Quasi rent is a phenomenon.
A.
medium term
B.
long term
C.
short term
D.
no time
Ans:
short term
Explanation :
Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.
[12] Which of the following economists is called the Father of Economics?
A.
Malthus
B.
Robinson
C.
Ricardo
D.
Adam Smith
Ans:
Adam Smith
Explanation :
Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the "father of modern economics." He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.
[13] Perfectly inelastic demand is equal to :
A.
One
B.
Infinite
C.
Zero
D.
Greater than one
Ans:
Zero
Explanation :
Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
[14] A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to -
A.
Zero
B.
One
C.
Less than one
D.
Infinity
Ans:
Infinity
Explanation :
Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
[15] 'Capital gains' refers to goods which -
A.
serve as a source of raising further capital
B.
help in the further production of goods
C.
directly go into the satisfaction of human wants
D.
find multiple uses
Ans:
help in the further production of goods
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Engel's law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. In other words, the income elasticity of demand of food is between 0 and 1. Engel's Law doesn't imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products (in % terms) less than their increases in income.
[4] The demand curve for a Giffen good is -
A.
upward rising
B.
downward falling
C.
parallel to the quantity axis
D.
parallel to the price axis
Ans:
upward rising
Explanation :
A Giffen good is a good whose consumption increases as its price increase. (For a normal good, as the price increases, consumption decreases.) Thus, the demand curve will be upward instead of down-ward sloping. A Giffen good has an upward sloping demand curve because it is exceptionally inferior. It has a strong negative income elasticity of demand such that when a price changes the income effect outweighs the substitution effect and this leads to perverse demand curve.
[5] If the price of Pepsi decreases relative to the price of Coke and 7-Up, the demand for -
A.
Coke will decrease
B.
7-Up will decrease
C.
Coke and 7-Up will increase
D.
Coke and 7-Up will decrease
Ans:
Coke and 7-Up will decrease
Explanation :
Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. A decrease in the price of a good normally results in an increase in the quantity demanded by consumers because of the law of demand, and conversely, quantity demanded decreases when price rises. So, here the decrease in price of Pepsi will increase in demand for it, while the demand for Coke and 7-Up will decrease because of no change in their price level.
[6] The demand curve shows that price and quantity demanded are -
A.
directly related only
B.
directly proportional and also directly related
C.
inversely proportional and aslo inversely related
D.
inversely related only
Ans:
inversely proportional and aslo inversely related
Explanation :
Law of demand states that consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good.
[7] If the main objective of the government is to raise revenue, it should tax commodities with -
A.
high elasticity of demand
B.
low elasticity of supply
C.
low elasticity of demand
D.
high income elasticity of demand
Ans:
low elasticity of demand
Explanation :
The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand. However, low-income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people. Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable.
[8] Monopoly means -
A.
single buyer
B.
many sellers
C.
single seller
D.
many buyers
Ans:
single seller
Explanation :
A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity, This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods
[9] Kinked demand curve is a feature of -
A.
Monopoly
B.
Oligopoly
C.
Monopsony
D.
Duopoly
Ans:
Oligopoly
Explanation :
The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
[10] Demand for complementary goods is known as -
A.
Joint demand
B.
Derived demand
C.
Direct demand
D.
Cross demand
Ans:
Joint demand
Explanation :
Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other.
[11] Quasi rent is a phenomenon.
A.
medium term
B.
long term
C.
short term
D.
no time
Ans:
short term
Explanation :
Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.
[12] Which of the following economists is called the Father of Economics?
A.
Malthus
B.
Robinson
C.
Ricardo
D.
Adam Smith
Ans:
Adam Smith
Explanation :
Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the "father of modern economics." He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.
[13] Perfectly inelastic demand is equal to :
A.
One
B.
Infinite
C.
Zero
D.
Greater than one
Ans:
Zero
Explanation :
Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
[14] A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to -
A.
Zero
B.
One
C.
Less than one
D.
Infinity
Ans:
Infinity
Explanation :
Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
[15] 'Capital gains' refers to goods which -
A.
serve as a source of raising further capital
B.
help in the further production of goods
C.
directly go into the satisfaction of human wants
D.
find multiple uses
Ans:
help in the further production of goods
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. A decrease in the price of a good normally results in an increase in the quantity demanded by consumers because of the law of demand, and conversely, quantity demanded decreases when price rises. So, here the decrease in price of Pepsi will increase in demand for it, while the demand for Coke and 7-Up will decrease because of no change in their price level.
[6] The demand curve shows that price and quantity demanded are -
A.
directly related only
B.
directly proportional and also directly related
C.
inversely proportional and aslo inversely related
D.
inversely related only
Ans:
inversely proportional and aslo inversely related
Explanation :
Law of demand states that consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good.
[7] If the main objective of the government is to raise revenue, it should tax commodities with -
A.
high elasticity of demand
B.
low elasticity of supply
C.
low elasticity of demand
D.
high income elasticity of demand
Ans:
low elasticity of demand
Explanation :
The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand. However, low-income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people. Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable.
[8] Monopoly means -
A.
single buyer
B.
many sellers
C.
single seller
D.
many buyers
Ans:
single seller
Explanation :
A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity, This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods
[9] Kinked demand curve is a feature of -
A.
Monopoly
B.
Oligopoly
C.
Monopsony
D.
Duopoly
Ans:
Oligopoly
Explanation :
The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
[10] Demand for complementary goods is known as -
A.
Joint demand
B.
Derived demand
C.
Direct demand
D.
Cross demand
Ans:
Joint demand
Explanation :
Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other.
[11] Quasi rent is a phenomenon.
A.
medium term
B.
long term
C.
short term
D.
no time
Ans:
short term
Explanation :
Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.
[12] Which of the following economists is called the Father of Economics?
A.
Malthus
B.
Robinson
C.
Ricardo
D.
Adam Smith
Ans:
Adam Smith
Explanation :
Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the "father of modern economics." He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.
[13] Perfectly inelastic demand is equal to :
A.
One
B.
Infinite
C.
Zero
D.
Greater than one
Ans:
Zero
Explanation :
Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
[14] A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to -
A.
Zero
B.
One
C.
Less than one
D.
Infinity
Ans:
Infinity
Explanation :
Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
[15] 'Capital gains' refers to goods which -
A.
serve as a source of raising further capital
B.
help in the further production of goods
C.
directly go into the satisfaction of human wants
D.
find multiple uses
Ans:
help in the further production of goods
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand. However, low-income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people. Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable.
[8] Monopoly means -
A.
single buyer
B.
many sellers
C.
single seller
D.
many buyers
Ans:
single seller
Explanation :
A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity, This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods
[9] Kinked demand curve is a feature of -
A.
Monopoly
B.
Oligopoly
C.
Monopsony
D.
Duopoly
Ans:
Oligopoly
Explanation :
The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
[10] Demand for complementary goods is known as -
A.
Joint demand
B.
Derived demand
C.
Direct demand
D.
Cross demand
Ans:
Joint demand
Explanation :
Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other.
[11] Quasi rent is a phenomenon.
A.
medium term
B.
long term
C.
short term
D.
no time
Ans:
short term
Explanation :
Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.
[12] Which of the following economists is called the Father of Economics?
A.
Malthus
B.
Robinson
C.
Ricardo
D.
Adam Smith
Ans:
Adam Smith
Explanation :
Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the "father of modern economics." He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.
[13] Perfectly inelastic demand is equal to :
A.
One
B.
Infinite
C.
Zero
D.
Greater than one
Ans:
Zero
Explanation :
Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
[14] A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to -
A.
Zero
B.
One
C.
Less than one
D.
Infinity
Ans:
Infinity
Explanation :
Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
[15] 'Capital gains' refers to goods which -
A.
serve as a source of raising further capital
B.
help in the further production of goods
C.
directly go into the satisfaction of human wants
D.
find multiple uses
Ans:
help in the further production of goods
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices.
[10] Demand for complementary goods is known as -
A.
Joint demand
B.
Derived demand
C.
Direct demand
D.
Cross demand
Ans:
Joint demand
Explanation :
Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other.
[11] Quasi rent is a phenomenon.
A.
medium term
B.
long term
C.
short term
D.
no time
Ans:
short term
Explanation :
Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.
[12] Which of the following economists is called the Father of Economics?
A.
Malthus
B.
Robinson
C.
Ricardo
D.
Adam Smith
Ans:
Adam Smith
Explanation :
Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the "father of modern economics." He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.
[13] Perfectly inelastic demand is equal to :
A.
One
B.
Infinite
C.
Zero
D.
Greater than one
Ans:
Zero
Explanation :
Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
[14] A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to -
A.
Zero
B.
One
C.
Less than one
D.
Infinity
Ans:
Infinity
Explanation :
Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
[15] 'Capital gains' refers to goods which -
A.
serve as a source of raising further capital
B.
help in the further production of goods
C.
directly go into the satisfaction of human wants
D.
find multiple uses
Ans:
help in the further production of goods
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments.
[12] Which of the following economists is called the Father of Economics?
A.
Malthus
B.
Robinson
C.
Ricardo
D.
Adam Smith
Ans:
Adam Smith
Explanation :
Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the "father of modern economics." He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics.
[13] Perfectly inelastic demand is equal to :
A.
One
B.
Infinite
C.
Zero
D.
Greater than one
Ans:
Zero
Explanation :
Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
[14] A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to -
A.
Zero
B.
One
C.
Less than one
D.
Infinity
Ans:
Infinity
Explanation :
Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
[15] 'Capital gains' refers to goods which -
A.
serve as a source of raising further capital
B.
help in the further production of goods
C.
directly go into the satisfaction of human wants
D.
find multiple uses
Ans:
help in the further production of goods
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity of demand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes).
[14] A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to -
A.
Zero
B.
One
C.
Less than one
D.
Infinity
Ans:
Infinity
Explanation :
Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity.
[15] 'Capital gains' refers to goods which -
A.
serve as a source of raising further capital
B.
help in the further production of goods
C.
directly go into the satisfaction of human wants
D.
find multiple uses
Ans:
help in the further production of goods
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses.
[16] From the national point of view, which of the following indicates micro approach?
A.
Study of sales of mobile phones by BSNL
B.
Unemployement among Women
C.
Per capita income in India
D.
Inflation in India
Ans:
Study of sales of mobile phones by BSNL
Explanation :
Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics.
[17] Returns to scale is a -
A.
timeless phenomenon
B.
directionless phenomenon
C.
short-run phenomenon
D.
long-run phenomenon
Ans:
long-run phenomenon
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Returns to Scale refer to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production.
[18] Rent is a factor payment paid to -
A.
land
B.
restaurant
C.
building
D.
factory
Ans:
land
Explanation :
Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship.
[19] Plant and machinery are -
A.
Producers' goods
B.
Consumers' goods
C.
Distributors' goods
D.
Free goods
Ans:
Producers' goods
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.
[20] Which activity is not included in production?
A.
Production of wheat by a farmer
B.
Production of medicines by a company
C.
Services given by a nurse in hospital
D.
Services done by a house-wife in her own house
Ans:
Services done by a house-wife in her own house
Explanation :
Services done by a house-wife in her own house are not included in production.
[21] Marginal cost is the -
A.
cost of producing a unit of output
B.
cost of producing an extra unit of output
C.
cost of producing the total output
D.
cost of producing a given level of output
Ans:
cost of producing an extra unit of output
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit.
[22] Under hill cost pricing, price is determined -
A.
by adding a margin to the average cost
B.
by comparing marginal cost and marginal revem
C.
by adding normal profit to the marginal cost
D.
by the total al cost of production
Ans:
by adding a margin to the average cost
Explanation :
Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what average total cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit.
[23] As output increases, average fixed cost -
A.
increases
B.
falls
C.
remains consl ant
D.
first increases, then falls
Ans:
falls
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output.
[24] Fixed cost is known as -
A.
Special cost
B.
Direct cost
C.
Prime cost
D.
Overhead cost
Ans:
Overhead cost
Explanation :
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. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced).
[25] All of the goods which are scarce and limited in supply are called -
A.
Luxury goods
B.
Expensive goods
C.
Capital goods
D.
Economic goods
Ans:
Economic goods
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.
Explanation :
In economics, a good is something that is intended to satisfy some wants or needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them.