[1] Sellers market denotes a situation where :
A.
commodities are available at competitive rates
B.
demand exceeds supply
C.
supply exceeds demand
D.
supply and demand are evenly balanced
Ans:
demand exceeds supply
Explanation :
Seller's market is a market which has more buyers than sellers. High prices result from this excess of demand over supply. The opposite of the seller's market is the buyer's market, where supply greatly exceeds demand.
[2] The fixed cost on such factors of production which are neither hired nor bought by the firm is called -
A.
social cost
B.
opportunity cost
C.
economic cost
D.
surcharged cost
Ans:
social cost
Explanation :
Social cost is defined as a sum of the private cost and external costs. The social cost is generally not borne by an individual. It may be borne by entire society, city or even country. This is not a one -time cost like private cost. This cost is recurrent and it is very difficult to calculate due to the inclusion of external costs. The cost may result from an event, action, or policy changes. Social costs are not calculated whenever a seller sells any product or item to buyer. This cost is added up from the use of that product.
[3] Under which market condition do firms have excess capacity?
A.
Perfect compettion
B.
Monopolistic competition
C.
Duopoly
D.
Oligopoly
Ans:
Monopolistic competition
Explanation :
Unlike a perfectly competitive firm, a monopolistically competitive firm ends up choosing a level of out- put that is below its minimum efficient scale. When the firm produces below its minimum efficient scale, it is under-utilizing its available resources. In this situation, the firm is said to have excess capacity because it can easily accommodate an increase in product ion. This excess capacity is the major social cost of a mo-nopolistically competitive market structure.
[4] Price theory is also known as -
A.
Macro Economics
B.
Development Economics
C.
Public Economics
D.
Micro Economics
Ans:
Micro Economics
Explanation :
Price theory is also known as micro economics and is concerned with the economic behaviour of individual consumers, producers and resource owners. Prof. Leftwich defines Price Theory as "it is concerned with the flow of goods and services from business firms to consumers, the composition of flow and the evaluation of pricing of the component parts of the flow. It is concerned too with the now of productive resources (or their services) from resource owners to business firms with their evaluation and with their allocation among alternative uses."
[5] Different firms constituting the industry, produce homogeneous goods under -
A.
monopoly
B.
monopolistic competition
C.
oligopoly
D.
perfect competition
Ans:
perfect competition
Explanation :
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another.
[6] Gross Profit means -
A.
Total investment over total saving
B.
Changes in methods of production
C.
Changes in the form of business organisation
D.
Total receipts over total expenditure
Ans:
Total receipts over total expenditure
Explanation :
In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting over-head, payroll, taxation, and interest payments. Gross profit = Net sales (total receipts) - Cost of goods sold (total expenditure).
[7] Which of the following is not a fixed cost?
A.
Salaries of administrative staff
B.
Rent of factory building
C.
Property taxes
D.
Electricity charges
Ans:
Salaries of administrative staff
Explanation :
Fixed costs arc 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. The salaries of administrative staff are variable costs.
[8] In which market structure is the demand curve of the market represented by the demand curve of the firm?
A.
Monopoly
B.
Oligopoly
C.
Duopoly
D.
Perfect Competition
Ans:
Monopoly
Explanation :
Because the monopolist is the market's only supplier, the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.
[9] If a firm is operating at loss in the short-period in perfect combination, it should :
A.
decrease the production and the price.
B.
increase the production and the price
C.
continue to operate as long as it covers even the variable costs.
D.
shut-down and leave the industry
Ans:
continue to operate as long as it covers even the variable costs.
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[10] At "Break-even point",
A.
the industry is in equilibrium in the long run.
B.
the producers suffers the minimum losses
C.
the seller earns maximum profit
D.
the firm is at zero-profit point
Ans:
the firm is at zero-profit point
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first major step towards profitability.
[11] The internal rate of return -
A.
must be less than the interest rate if the firm is to in-vest.
B.
makes the present value of profits equal to the present value of costs.
C.
falls as the annual yield of an investment rises.
D.
is equal to the market interest rate for all the firm's in-vestment.
Ans:
falls as the annual yield of an investment rises.
Explanation :
The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
[12] Which of the following occurs when labour productivity rises?
A.
The equilibrium nominal wage falls.
B.
The equilibrium quantity of labour falls.
C.
Competitive firms will be induced to use more capital
D.
The labour demand curve shifts to the right
Ans:
The labour demand curve shifts to the right
Explanation :
As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
[13] Which of the following are consumer semi-durable goods?
A.
Cars and television sets
B.
Milk and Milk products
C.
Foodgrains and other food products
D.
Electrical appliance like fans and electric irons.
Ans:
Foodgrains and other food products
Explanation :
Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
[14] Which of the following statements is correct?
A.
Most workers will work for less than their reservation wage.
B.
The reservation wage is the maximum amount any firm will pay for a worker.
C.
Economic rent is the difference between the market wage and the reservation wage.
D.
Economic rent is the amount one must pay to enter a desirable labour market.
Ans:
Economic rent is the difference between the market wage and the reservation wage.
Explanation :
The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
[15] The basic object of all production is to -
A.
satisfy human wants
B.
provide employment
C.
make profits
D.
increase physical output
Ans:
satisfy human wants
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
Seller's market is a market which has more buyers than sellers. High prices result from this excess of demand over supply. The opposite of the seller's market is the buyer's market, where supply greatly exceeds demand.
[2] The fixed cost on such factors of production which are neither hired nor bought by the firm is called -
A.
social cost
B.
opportunity cost
C.
economic cost
D.
surcharged cost
Ans:
social cost
Explanation :
Social cost is defined as a sum of the private cost and external costs. The social cost is generally not borne by an individual. It may be borne by entire society, city or even country. This is not a one -time cost like private cost. This cost is recurrent and it is very difficult to calculate due to the inclusion of external costs. The cost may result from an event, action, or policy changes. Social costs are not calculated whenever a seller sells any product or item to buyer. This cost is added up from the use of that product.
[3] Under which market condition do firms have excess capacity?
A.
Perfect compettion
B.
Monopolistic competition
C.
Duopoly
D.
Oligopoly
Ans:
Monopolistic competition
Explanation :
Unlike a perfectly competitive firm, a monopolistically competitive firm ends up choosing a level of out- put that is below its minimum efficient scale. When the firm produces below its minimum efficient scale, it is under-utilizing its available resources. In this situation, the firm is said to have excess capacity because it can easily accommodate an increase in product ion. This excess capacity is the major social cost of a mo-nopolistically competitive market structure.
[4] Price theory is also known as -
A.
Macro Economics
B.
Development Economics
C.
Public Economics
D.
Micro Economics
Ans:
Micro Economics
Explanation :
Price theory is also known as micro economics and is concerned with the economic behaviour of individual consumers, producers and resource owners. Prof. Leftwich defines Price Theory as "it is concerned with the flow of goods and services from business firms to consumers, the composition of flow and the evaluation of pricing of the component parts of the flow. It is concerned too with the now of productive resources (or their services) from resource owners to business firms with their evaluation and with their allocation among alternative uses."
[5] Different firms constituting the industry, produce homogeneous goods under -
A.
monopoly
B.
monopolistic competition
C.
oligopoly
D.
perfect competition
Ans:
perfect competition
Explanation :
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another.
[6] Gross Profit means -
A.
Total investment over total saving
B.
Changes in methods of production
C.
Changes in the form of business organisation
D.
Total receipts over total expenditure
Ans:
Total receipts over total expenditure
Explanation :
In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting over-head, payroll, taxation, and interest payments. Gross profit = Net sales (total receipts) - Cost of goods sold (total expenditure).
[7] Which of the following is not a fixed cost?
A.
Salaries of administrative staff
B.
Rent of factory building
C.
Property taxes
D.
Electricity charges
Ans:
Salaries of administrative staff
Explanation :
Fixed costs arc 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. The salaries of administrative staff are variable costs.
[8] In which market structure is the demand curve of the market represented by the demand curve of the firm?
A.
Monopoly
B.
Oligopoly
C.
Duopoly
D.
Perfect Competition
Ans:
Monopoly
Explanation :
Because the monopolist is the market's only supplier, the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.
[9] If a firm is operating at loss in the short-period in perfect combination, it should :
A.
decrease the production and the price.
B.
increase the production and the price
C.
continue to operate as long as it covers even the variable costs.
D.
shut-down and leave the industry
Ans:
continue to operate as long as it covers even the variable costs.
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[10] At "Break-even point",
A.
the industry is in equilibrium in the long run.
B.
the producers suffers the minimum losses
C.
the seller earns maximum profit
D.
the firm is at zero-profit point
Ans:
the firm is at zero-profit point
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first major step towards profitability.
[11] The internal rate of return -
A.
must be less than the interest rate if the firm is to in-vest.
B.
makes the present value of profits equal to the present value of costs.
C.
falls as the annual yield of an investment rises.
D.
is equal to the market interest rate for all the firm's in-vestment.
Ans:
falls as the annual yield of an investment rises.
Explanation :
The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
[12] Which of the following occurs when labour productivity rises?
A.
The equilibrium nominal wage falls.
B.
The equilibrium quantity of labour falls.
C.
Competitive firms will be induced to use more capital
D.
The labour demand curve shifts to the right
Ans:
The labour demand curve shifts to the right
Explanation :
As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
[13] Which of the following are consumer semi-durable goods?
A.
Cars and television sets
B.
Milk and Milk products
C.
Foodgrains and other food products
D.
Electrical appliance like fans and electric irons.
Ans:
Foodgrains and other food products
Explanation :
Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
[14] Which of the following statements is correct?
A.
Most workers will work for less than their reservation wage.
B.
The reservation wage is the maximum amount any firm will pay for a worker.
C.
Economic rent is the difference between the market wage and the reservation wage.
D.
Economic rent is the amount one must pay to enter a desirable labour market.
Ans:
Economic rent is the difference between the market wage and the reservation wage.
Explanation :
The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
[15] The basic object of all production is to -
A.
satisfy human wants
B.
provide employment
C.
make profits
D.
increase physical output
Ans:
satisfy human wants
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
Unlike a perfectly competitive firm, a monopolistically competitive firm ends up choosing a level of out- put that is below its minimum efficient scale. When the firm produces below its minimum efficient scale, it is under-utilizing its available resources. In this situation, the firm is said to have excess capacity because it can easily accommodate an increase in product ion. This excess capacity is the major social cost of a mo-nopolistically competitive market structure.
[4] Price theory is also known as -
A.
Macro Economics
B.
Development Economics
C.
Public Economics
D.
Micro Economics
Ans:
Micro Economics
Explanation :
Price theory is also known as micro economics and is concerned with the economic behaviour of individual consumers, producers and resource owners. Prof. Leftwich defines Price Theory as "it is concerned with the flow of goods and services from business firms to consumers, the composition of flow and the evaluation of pricing of the component parts of the flow. It is concerned too with the now of productive resources (or their services) from resource owners to business firms with their evaluation and with their allocation among alternative uses."
[5] Different firms constituting the industry, produce homogeneous goods under -
A.
monopoly
B.
monopolistic competition
C.
oligopoly
D.
perfect competition
Ans:
perfect competition
Explanation :
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another.
[6] Gross Profit means -
A.
Total investment over total saving
B.
Changes in methods of production
C.
Changes in the form of business organisation
D.
Total receipts over total expenditure
Ans:
Total receipts over total expenditure
Explanation :
In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting over-head, payroll, taxation, and interest payments. Gross profit = Net sales (total receipts) - Cost of goods sold (total expenditure).
[7] Which of the following is not a fixed cost?
A.
Salaries of administrative staff
B.
Rent of factory building
C.
Property taxes
D.
Electricity charges
Ans:
Salaries of administrative staff
Explanation :
Fixed costs arc 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. The salaries of administrative staff are variable costs.
[8] In which market structure is the demand curve of the market represented by the demand curve of the firm?
A.
Monopoly
B.
Oligopoly
C.
Duopoly
D.
Perfect Competition
Ans:
Monopoly
Explanation :
Because the monopolist is the market's only supplier, the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.
[9] If a firm is operating at loss in the short-period in perfect combination, it should :
A.
decrease the production and the price.
B.
increase the production and the price
C.
continue to operate as long as it covers even the variable costs.
D.
shut-down and leave the industry
Ans:
continue to operate as long as it covers even the variable costs.
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[10] At "Break-even point",
A.
the industry is in equilibrium in the long run.
B.
the producers suffers the minimum losses
C.
the seller earns maximum profit
D.
the firm is at zero-profit point
Ans:
the firm is at zero-profit point
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first major step towards profitability.
[11] The internal rate of return -
A.
must be less than the interest rate if the firm is to in-vest.
B.
makes the present value of profits equal to the present value of costs.
C.
falls as the annual yield of an investment rises.
D.
is equal to the market interest rate for all the firm's in-vestment.
Ans:
falls as the annual yield of an investment rises.
Explanation :
The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
[12] Which of the following occurs when labour productivity rises?
A.
The equilibrium nominal wage falls.
B.
The equilibrium quantity of labour falls.
C.
Competitive firms will be induced to use more capital
D.
The labour demand curve shifts to the right
Ans:
The labour demand curve shifts to the right
Explanation :
As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
[13] Which of the following are consumer semi-durable goods?
A.
Cars and television sets
B.
Milk and Milk products
C.
Foodgrains and other food products
D.
Electrical appliance like fans and electric irons.
Ans:
Foodgrains and other food products
Explanation :
Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
[14] Which of the following statements is correct?
A.
Most workers will work for less than their reservation wage.
B.
The reservation wage is the maximum amount any firm will pay for a worker.
C.
Economic rent is the difference between the market wage and the reservation wage.
D.
Economic rent is the amount one must pay to enter a desirable labour market.
Ans:
Economic rent is the difference between the market wage and the reservation wage.
Explanation :
The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
[15] The basic object of all production is to -
A.
satisfy human wants
B.
provide employment
C.
make profits
D.
increase physical output
Ans:
satisfy human wants
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
The fundamental condition of perfect competition is that there must be a large number of sellers or firms. Homogeneous Commodity is the second fundamental condition of a perfect market. The products of all firms in the industry are homogeneous and identical. In other words, they are perfect substitutes for one another.
[6] Gross Profit means -
A.
Total investment over total saving
B.
Changes in methods of production
C.
Changes in the form of business organisation
D.
Total receipts over total expenditure
Ans:
Total receipts over total expenditure
Explanation :
In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting over-head, payroll, taxation, and interest payments. Gross profit = Net sales (total receipts) - Cost of goods sold (total expenditure).
[7] Which of the following is not a fixed cost?
A.
Salaries of administrative staff
B.
Rent of factory building
C.
Property taxes
D.
Electricity charges
Ans:
Salaries of administrative staff
Explanation :
Fixed costs arc 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. The salaries of administrative staff are variable costs.
[8] In which market structure is the demand curve of the market represented by the demand curve of the firm?
A.
Monopoly
B.
Oligopoly
C.
Duopoly
D.
Perfect Competition
Ans:
Monopoly
Explanation :
Because the monopolist is the market's only supplier, the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.
[9] If a firm is operating at loss in the short-period in perfect combination, it should :
A.
decrease the production and the price.
B.
increase the production and the price
C.
continue to operate as long as it covers even the variable costs.
D.
shut-down and leave the industry
Ans:
continue to operate as long as it covers even the variable costs.
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[10] At "Break-even point",
A.
the industry is in equilibrium in the long run.
B.
the producers suffers the minimum losses
C.
the seller earns maximum profit
D.
the firm is at zero-profit point
Ans:
the firm is at zero-profit point
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first major step towards profitability.
[11] The internal rate of return -
A.
must be less than the interest rate if the firm is to in-vest.
B.
makes the present value of profits equal to the present value of costs.
C.
falls as the annual yield of an investment rises.
D.
is equal to the market interest rate for all the firm's in-vestment.
Ans:
falls as the annual yield of an investment rises.
Explanation :
The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
[12] Which of the following occurs when labour productivity rises?
A.
The equilibrium nominal wage falls.
B.
The equilibrium quantity of labour falls.
C.
Competitive firms will be induced to use more capital
D.
The labour demand curve shifts to the right
Ans:
The labour demand curve shifts to the right
Explanation :
As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
[13] Which of the following are consumer semi-durable goods?
A.
Cars and television sets
B.
Milk and Milk products
C.
Foodgrains and other food products
D.
Electrical appliance like fans and electric irons.
Ans:
Foodgrains and other food products
Explanation :
Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
[14] Which of the following statements is correct?
A.
Most workers will work for less than their reservation wage.
B.
The reservation wage is the maximum amount any firm will pay for a worker.
C.
Economic rent is the difference between the market wage and the reservation wage.
D.
Economic rent is the amount one must pay to enter a desirable labour market.
Ans:
Economic rent is the difference between the market wage and the reservation wage.
Explanation :
The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
[15] The basic object of all production is to -
A.
satisfy human wants
B.
provide employment
C.
make profits
D.
increase physical output
Ans:
satisfy human wants
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
Fixed costs arc 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. The salaries of administrative staff are variable costs.
[8] In which market structure is the demand curve of the market represented by the demand curve of the firm?
A.
Monopoly
B.
Oligopoly
C.
Duopoly
D.
Perfect Competition
Ans:
Monopoly
Explanation :
Because the monopolist is the market's only supplier, the demand curve the monopolist faces is the market demand curve. The market demand curve is downward sloping, reflecting the law of demand. The fact that the monopolist faces a downward-sloping demand curve implies that the price a monopolist can expect to receive for its output will not remain constant as the monopolist increases its output.
[9] If a firm is operating at loss in the short-period in perfect combination, it should :
A.
decrease the production and the price.
B.
increase the production and the price
C.
continue to operate as long as it covers even the variable costs.
D.
shut-down and leave the industry
Ans:
continue to operate as long as it covers even the variable costs.
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[10] At "Break-even point",
A.
the industry is in equilibrium in the long run.
B.
the producers suffers the minimum losses
C.
the seller earns maximum profit
D.
the firm is at zero-profit point
Ans:
the firm is at zero-profit point
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first major step towards profitability.
[11] The internal rate of return -
A.
must be less than the interest rate if the firm is to in-vest.
B.
makes the present value of profits equal to the present value of costs.
C.
falls as the annual yield of an investment rises.
D.
is equal to the market interest rate for all the firm's in-vestment.
Ans:
falls as the annual yield of an investment rises.
Explanation :
The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
[12] Which of the following occurs when labour productivity rises?
A.
The equilibrium nominal wage falls.
B.
The equilibrium quantity of labour falls.
C.
Competitive firms will be induced to use more capital
D.
The labour demand curve shifts to the right
Ans:
The labour demand curve shifts to the right
Explanation :
As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
[13] Which of the following are consumer semi-durable goods?
A.
Cars and television sets
B.
Milk and Milk products
C.
Foodgrains and other food products
D.
Electrical appliance like fans and electric irons.
Ans:
Foodgrains and other food products
Explanation :
Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
[14] Which of the following statements is correct?
A.
Most workers will work for less than their reservation wage.
B.
The reservation wage is the maximum amount any firm will pay for a worker.
C.
Economic rent is the difference between the market wage and the reservation wage.
D.
Economic rent is the amount one must pay to enter a desirable labour market.
Ans:
Economic rent is the difference between the market wage and the reservation wage.
Explanation :
The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
[15] The basic object of all production is to -
A.
satisfy human wants
B.
provide employment
C.
make profits
D.
increase physical output
Ans:
satisfy human wants
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
The demand for labour is "derived- from the production and demand for the product being demanded. If the demand for the product increases, either the price will increase or the demand for production labour will increase until the equilibrium price and production numbers are met. Labour is "derived" from the market demand for the product.
[10] At "Break-even point",
A.
the industry is in equilibrium in the long run.
B.
the producers suffers the minimum losses
C.
the seller earns maximum profit
D.
the firm is at zero-profit point
Ans:
the firm is at zero-profit point
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even." For businesses, reaching the break-even point is the first major step towards profitability.
[11] The internal rate of return -
A.
must be less than the interest rate if the firm is to in-vest.
B.
makes the present value of profits equal to the present value of costs.
C.
falls as the annual yield of an investment rises.
D.
is equal to the market interest rate for all the firm's in-vestment.
Ans:
falls as the annual yield of an investment rises.
Explanation :
The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
[12] Which of the following occurs when labour productivity rises?
A.
The equilibrium nominal wage falls.
B.
The equilibrium quantity of labour falls.
C.
Competitive firms will be induced to use more capital
D.
The labour demand curve shifts to the right
Ans:
The labour demand curve shifts to the right
Explanation :
As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
[13] Which of the following are consumer semi-durable goods?
A.
Cars and television sets
B.
Milk and Milk products
C.
Foodgrains and other food products
D.
Electrical appliance like fans and electric irons.
Ans:
Foodgrains and other food products
Explanation :
Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
[14] Which of the following statements is correct?
A.
Most workers will work for less than their reservation wage.
B.
The reservation wage is the maximum amount any firm will pay for a worker.
C.
Economic rent is the difference between the market wage and the reservation wage.
D.
Economic rent is the amount one must pay to enter a desirable labour market.
Ans:
Economic rent is the difference between the market wage and the reservation wage.
Explanation :
The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
[15] The basic object of all production is to -
A.
satisfy human wants
B.
provide employment
C.
make profits
D.
increase physical output
Ans:
satisfy human wants
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
The internal rate of return on an investment or project is the "annualized effective compounded re-turn rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero. In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment.
[12] Which of the following occurs when labour productivity rises?
A.
The equilibrium nominal wage falls.
B.
The equilibrium quantity of labour falls.
C.
Competitive firms will be induced to use more capital
D.
The labour demand curve shifts to the right
Ans:
The labour demand curve shifts to the right
Explanation :
As labour productivity increases, the production function shifts up and simultaneously the labor demand curve shifts out and right. At a given real wage, more workers are hired and output increases. Similarly, as the capital stock increases, the production function shifts up and simultaneously the labor demand curve shifts out and right.
[13] Which of the following are consumer semi-durable goods?
A.
Cars and television sets
B.
Milk and Milk products
C.
Foodgrains and other food products
D.
Electrical appliance like fans and electric irons.
Ans:
Foodgrains and other food products
Explanation :
Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
[14] Which of the following statements is correct?
A.
Most workers will work for less than their reservation wage.
B.
The reservation wage is the maximum amount any firm will pay for a worker.
C.
Economic rent is the difference between the market wage and the reservation wage.
D.
Economic rent is the amount one must pay to enter a desirable labour market.
Ans:
Economic rent is the difference between the market wage and the reservation wage.
Explanation :
The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
[15] The basic object of all production is to -
A.
satisfy human wants
B.
provide employment
C.
make profits
D.
increase physical output
Ans:
satisfy human wants
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
Goods which are neither indestructible nor lasting are defined as Semi Durable Goods. They fall in the category between Durable Goods and Non Durable Goods. Some common Semi Durable Goods are clothing or preserved foods: vehicles and electronic home appliances are classified as Durable Goods.
[14] Which of the following statements is correct?
A.
Most workers will work for less than their reservation wage.
B.
The reservation wage is the maximum amount any firm will pay for a worker.
C.
Economic rent is the difference between the market wage and the reservation wage.
D.
Economic rent is the amount one must pay to enter a desirable labour market.
Ans:
Economic rent is the difference between the market wage and the reservation wage.
Explanation :
The difference between the actual market wage and the reservation wage is called economic rent. Therefore, the lower a person's reservation wage compared to the actual wage, the more rent they receive. While labour supply decisions determine the reservation wage, the employment decisions of firms establish the value of the real wage at which any per-son becomes unemployed (The Goals of Macroeconomic Policy by Martin Prachowny. p. 58).
[15] The basic object of all production is to -
A.
satisfy human wants
B.
provide employment
C.
make profits
D.
increase physical output
Ans:
satisfy human wants
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
According to Adam Smith, consumption is the sole end and purpose of all production. The goal of production is the satisfaction of human desire. All the processes, by which human labor creates goods and services, bring them to the ultimate consumer.
[16] The equilibrium of a firm under perfect competition will be determined when -
A.
Marginal Revenue > Average Cost
B.
Marginal Revenue > Average Revenue
C.
Marginal Revenue = Marginal Cost
D.
Marginal Cost > Average Cost
Ans:
Marginal Revenue = Marginal Cost
Explanation :
When the marginal revenue productivity of a factor is equal to the marginal- cost (MR=MC) of the factor, the firm will be in equilibrium and its profits maxmized. Equilibrium in perfect competition is the point where market demands will be equal to market supply. The condition that price equals both average revenue and marginal revenue (P = AR = MR) is the standard condition for a perfectly competitive firm.
[17] Which of the following is an inverted `U' shaped curve?
A.
Average cost
B.
Marginal cost
C.
Total cost
D.
Fixed cost
Ans:
Average cost
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
In economics, a cost curve is a graph of the costs of production as a function of total quantity produced. Both the Short-run average total cost curve (SRAC) and Long-run average cost curve (LRAC) curves are typically expressed as U-shaped. However, the shapes of the curves are not due to the same factors.
[18] Which one of the following is having elastic demand?
A.
Electricity
B.
Medicines
C.
Rice
D.
Match boxes
Ans:
Electricity
Explanation :
In economics, the demand elasticity refers to how sensitive the demand for a good is to changes in other economic variables. The demand for those goods having more than one use is said to be elastic. Electricity can be used for a number of purposes like heating, lighting, cooking, cooling etc. If the electricity bill increases people utilize electricity for certain important urgent purpose and if the bill falls people use electricity for a number of other unimportant uses. Thus the demand for electricity is elastic.
[19] Same price prevails throughout the market under -
A.
perfect competition
B.
monopoly
C.
monopolistic competition
D.
oligopoly
Ans:
perfect competition
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
Under perfect competition, the control over price is completely eliminated because all firms produce homogeneous commodities. This condition ensures that the same price prevails in the market for the same commodity.
[20] Selling cost means:
A.
Cost of selling a product
B.
Cost incurred in transportation
C.
Cost Incurred in advertisement
D.
Cost Incurred on fact ors of production
Ans:
Cost Incurred in advertisement
Explanation :
Selling cost is total cost of marketing, advertising, and selling a product. It differs from the production cost which is incurred to produce goods. Selling cost influences the commercial desire to purchase a commodity.
[21] A want becomes a demand only when it is backed by the -
A.
Ability to purchase
B.
Necessity to buy
C.
Desire to buy
D.
Utility of the product
Ans:
Ability to purchase
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
Need," "Want," and "Demand" are the three key concepts of marketing. Needs are the basic human requirements. These needs become wants when they are directed to specific objects that might satisfy the need, though these wants in themselves are not essential for living. Wants are therefore shaped by one's society and surroundings. The third concept, demands, are wants for specific products backed by an ability to pay. Many people want a luxury car or a weekend break in the Caribbean, but only a few people are willing and able to buy one.
[22] "Economics is what it ought to be" - This statement refers to -
A.
Normative economics
B.
Positive economics
C.
Monetary economics
D.
Fiscal economics
Ans:
Normative economics
Explanation :
Normative economics (as opposed to positive economics) is that part of economics that expresses value judgments (normative judgments) about economic fairness or what the economy ought to be like or what goals of public policy ought to be. It is the study or presentation of "what ought to be" rather than what actually is. Normative economics deals heavily in value judgments and theoretical scenarios. An example of a normative economic statement would be, "We should cut taxes in half to increase disposable income levels".
[23] The 'breali-even point' is where -
A.
marginal revenue equals marginal cost
B.
average revenue equals average cost
C.
total revenue equals total cost
D.
None of these
Ans:
average revenue equals average cost
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
The break-even point (BEP) is the point at which cost or expenses and revenue are equal: there is no net loss or gain, and one has "broken even". A profit or a loss has not been made, although opportunity costs have been "paid", and capital has received the risk-adjusted, expected return.
[24] One of the essential conditions of Monopolistic competition is -
A.
Many buyers but one seller
B.
Price discrimination
C.
Product differentiation
D.
Homogeneous product
Ans:
Product differentiation
Explanation :
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another as goods but not perfect substitutes (such as from branding, quality, or location). In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In a monopolistically competitive market, firms can behave like monopolies in the short run, including by using market power to generate profit. In the long run, however, other firms enter the market and the benefits of differentiation decrease with competition; the market becomes more like a perfectly competitive one where firms cannot gain economic profit.
[25] The General Equilibrium Analysis" was developed by -
A.
Marshall
B.
Ricardo
C.
Walras
D.
Adam Smith
Ans:
Walras
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.
Explanation :
French economist Leon Walras put forward the General Equilibrium Theory in his pioneering 1874 work 'Elements of Pure Economics'. The theory attempts to explain the functioning of economic markets as a whole, rather than as individual phenomena. It tried to show how and why all free markets tended toward equilibrium in the long run.