McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: General Knowledge (GK) , Union Public Service Commission (UPSC) .
| 1. |
Effective demand depends on - |
| A. | capital-output ratio |
| B. | output-capital ratio |
| C. | total expenditure |
| D. | supply price |
| Answer» D. supply price | |
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Explanation: Effective Demand is "the demand in which the consumer are able and willing to purchase at conceivable price" simply saying if the product price is low more will buy; but if the rates go high then the quantity of the demand goes down. Keynes used Iwo terms: Aggregate Demand Function or Price and Aggregate Supply Function or Price to explain the determination of effective demand. |
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| 2. |
The basic problem studied in Macro - Economics is - |
| A. | production of income |
| B. | usage of income |
| C. | flow of income |
| D. | distribution of income |
| Answer» A. production of income | |
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Explanation: Macroeconomics involves the sum total of economic activity, dealing with the issues such as production of national income, growth, inflation, and unemployment. It is all about is about maximizing national income and growth. |
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| 3. |
Prof Miltion Fridman was leader of - |
| A. | Ohio school |
| B. | Chicago school |
| C. | Cambridge school |
| D. | London school |
| Answer» B. Chicago school | |
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Explanation: Milton Friedman was a leader of the Chicago school of economics. He profoundly influenced the research on consumption analysis, monetary history and theory, and the complexity of stabilization policy. He was a recipient of the 1976 Nobel Prize in Economic Sciences. |
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| 4. |
Who is called the 'Father of Economics'? |
| A. | Max Muller |
| B. | Karl Marx |
| C. | Adam Smith |
| D. | Alfred Marshall |
| Answer» C. Adam Smith | |
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Explanation: Adam Smith who laid the foundations of classical free market economic theory is known as the Father of Modern Economics. His magnum opus, An Inquiry into the Nature and Causes of the Wealth of Nations (1776),' is considered the first modern work of economics. |
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| 5. |
The bank cheques are processed by using - |
| A. | OCR |
| B. | MICR |
| C. | OMR |
| D. | PMR |
| Answer» B. MICR | |
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Explanation: Magnetic Ink Character Recognition, or MICR, is a character recognition technology used primarily by the banking industry to facilitate the processing of cheques and makes up the routing number and account number at the bottom of a cheque. The technology allows computers to read information (such as account numbers) off printed documents. Unlike barcodes or similar technologies, however, MICR codes can be easily read by humans. MICR characters are printed in special typefaces with a magnetic ink or toner, usually containing iron oxide. |
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| 6. |
When was the Minimum Wages Act enacted in India? |
| A. | 1936 |
| B. | 1948 |
| C. | 1951 |
| D. | 1956 |
| Answer» B. 1948 | |
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Explanation: The Minimum Wages Act, 1948 was enacted to safeguard the interests of workers, mostly in the unorganized sector by providing for the fixation of minimum wages in certain specified employments. It binds the employers to pay their workers the minimum wages fixed under the Act from time to time. |
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| 7. |
Identify the one which is not related to the Agricultural Price Policy. |
| A. | Buffer stock |
| B. | Imports |
| C. | Support price |
| D. | Licensing |
| Answer» D. Licensing | |
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Explanation: Licensing is a marketing and brand extension tool that is widely used by everyone from major corporations to the smallest of small business. A license may be issued by authorities, to allow an activity that would otherwise be forbidden. |
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| 8. |
Steel sheets used in the production of furnitures is an example of |
| A. | an intermediate good |
| B. | a final good |
| C. | an investment good |
| D. | a consumption good |
| Answer» A. an intermediate good | |
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Explanation: Intermediate goods are semi- finished products are goods that are used as inputs in the production of oilier goods including final goods. It comprises material or item that is a final-product of a process, but is also used as an input in the production process of some other good. In the production process, intermediate goods either become part of the final product, or are changed beyond recognition. |
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| 9. |
The main source of long-term credit for a business unit is - |
| A. | sale of stocks and bonds to the public |
| B. | borrowing from banks |
| C. | loans from the Government |
| D. | deposits from the public and financial institutions |
| Answer» A. sale of stocks and bonds to the public | |
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Explanation: Companies issue securities called stocks and bonds to raise necessary capital which funds the company's daily operations and |
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| 10. |
Devaluation of money means : |
| A. | decrease in the internal value of money |
| B. | decrease in the external value of money |
| C. | decrease in both internal and external value of money |
| D. | the government takes back currency notes of any denominations |
| Answer» A. decrease in the internal value of money | |
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Explanation: Devaluation refers to a decline in the value of a currency in relation to another, usually brought about by the actions of a central bank or monetary authority. Devaluation is sometimes used more generally to describe any significant drop in a currency's international exchange rate, although usually a decline caused by market forces with no government intervention is termed a depreciation. Devaluations are most often associated with developing countries that don't allow their currency prices to float freely on the open market. |
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| 11. |
Under flexible exchange rate system, the exchange rate is determined by - |
| A. | the Central Bank of the country |
| B. | the forces of demand and supply in the foreign exchange market |
| C. | the price of gold |
| D. | the purchasing power of currencies |
| Answer» B. the forces of demand and supply in the foreign exchange market | |
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Explanation: A floating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. It refers to a country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that particular currency relative to other currencies. |
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| 12. |
Bank rate is the rate of interest - |
| A. | at which public borrows money from Commercial Bank |
| B. | at which public borrows money from RBI |
| C. | at which Commercial Banks borrow money from RBI |
| D. | at which Commercial Banks borrow money from public |
| Answer» C. at which Commercial Banks borrow money from RBI | |
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Explanation: Bank Rate is the interest rate at which a nation’s central bank lends money to domestic banks. Managing the bank rate is a preferred method by which central banks can regulate the level of economic activity. |
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| 13. |
Open Market Operations refer to |
| A. | Borrowings by Scheduled banks from RBI |
| B. | Lending by Commercial banks to industry |
| C. | Purchase and sale of Government securities by RBI |
| D. | Deposit mobilization |
| Answer» C. Purchase and sale of Government securities by RBI | |
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Explanation: Open Market Operation (OMO) refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system. A central bank uses OMO as the primary means of implementing monetary policy. |
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| 14. |
Which of the following is the classification of Industries on the basis of raw-materials? |
| A. | Small Scale — Large scale |
| B. | Primary and Secondary |
| C. | Basic and Consumer |
| D. | Agro-based and Mineral based |
| Answer» D. Agro-based and Mineral based | |
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Explanation: Industries are classified on the bases of source of raw material. There are two types of industries agro based and mineral based industries. Agro based industries are the one that produce jute, cotton, silk, tea. coffee, rubber etc. Mineral based industries are iron and steel, cement, aluminum, machine tools, and petrochemicals producing industries |
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| 15. |
Which one of the following items is not included in the current account of India's Balance of Payments? |
| A. | Short-term commercial borrowings |
| B. | Non-monetary gold movements |
| C. | Investment income |
| D. | Transfer payments |
| Answer» B. Non-monetary gold movements | |
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Explanation: Balance of payments (BoP) accounts are an accounting record of all monetary transactions between a country and the rest of the world. These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The two principal parts of the BOP accounts are the current account and the capital account. The current account shows the net amount a country is earning if it is in surplus or spending if it is in deficit. It is the sum of the balance of trade (net earnings on exports minus payments for imports), factor income (earnings on foreign investments minus payments made to foreign investors) and cash transfers. |
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| 16. |
The New Economic Policy was introduced by: |
| A. | Lenin |
| B. | Stalin |
| C. | Kerensky |
| D. | Khrushchev |
| Answer» A. Lenin | |
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Explanation: The New Economics Policy was introduced by Vladimir Ilyich Lenin (1870- 1924). He was founder of modern communist Russia. He was the leader of Soviet Revolution of October 1917. He liberated the country from the Czars and became Head of its first Communist Government (1917-1924). He dedicated himself to the cause of workers' revolution. |
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| 17. |
"Functional Finance" is associated with : |
| A. | Adolph Wogner |
| B. | Adam Smith |
| C. | Adams |
| D. | Abba 'V Lerner |
| Answer» D. Abba 'V Lerner | |
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Explanation: Functional finance is an economic theory proposed by Abba P. Lerner, based on effective demand principle and cartelism. It states that government should finance itself to meet explicit goals, such as taming the business cycle, achieving full employment, ensuring growth, and low inflation. |
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| 18. |
Multiplier process in economic theory is conventionally taken to mean: |
| A. | the manner in which prices increase |
| B. | the manner in which banks create credit |
| C. | income of an economy grows on account of an initial investment |
| D. | the manner in which government expenditure increases |
| Answer» C. income of an economy grows on account of an initial investment | |
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Explanation: In economics, a multiplier is a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable. For example, suppose a one-unit change in some variable x causes another variable y to change by M units. Then the multiplier is M. In monetary macroeconomics and banking, the money multiplier measures how much the money supply increases in response to a change in the monetary base. The multiplier may vary across countries, and will also vary depending on what measures of money are considered. For example, consider M2 as a measure of the U.S. money supply, and MO as a measure of the U.S. monetary base. |
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| 19. |
Personal disposable income is : |
| A. | always equal to personal income. |
| B. | always more than personal income. |
| C. | equal to personal income minus direct taxes paid by household. |
| D. | equal to personal income minus indirect taxes. |
| Answer» C. equal to personal income minus direct taxes paid by household. | |
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Explanation: Disposable income is total personal income minus personal current taxes. In national accounts definitions, personal income, minus personal current taxes equals disposable personal income. Subtracting personal outlays (which includes the major category of personal(or, private) consumption expenditure) yields personal (or, private) savings |
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| 20. |
Which one of the following is not a method of measurement of National Income? |
| A. | Value Added Method |
| B. | Income Method |
| C. | Investment Method |
| D. | Expenditure Method |
| Answer» C. Investment Method | |
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Explanation: Primarily there are three methods of measuring national income. The methods are product method, income method and expenditure method. Product method is given by Dr. Alfred Marshall, income method by A.C. Pigou and expenditure method by Dr. Irving Fisher. The 'Investment Method' is used for trading properties where evidence of rates is slight, such as hotels, cinema, car park and etc. |
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| 21. |
Which one of the following would not constitute an economic activity? |
| A. | A teacher teaching students in his class |
| B. | A teacher teaching students under Sarva Shiksha Abhiyan |
| C. | A teacher teaching his own daughter at home |
| D. | A teacher providing consultancy services from his residence |
| Answer» C. A teacher teaching his own daughter at home | |
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Explanation: Economic activities are related to production, distribution, exchange and consumption of goods and services. The primary aim of the economic activity is the production of goods and services with a view to make them available to consumer "Human activities which are performed in exchange for money or money's worth are called economic activities." In other words, economic activities are those efforts which are undertaken by man to earn Income. Money, and Wealth for his life and to secure maximum satisfaction of wants with limited and scarce means. A teacher teaching his own daughter at home is a non-economic activity. "Human activities which are not performed for money or money's worth arc called non- economic activities." Here, there is no monetary consideration in exchange for such activities. |
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| 22. |
Transfer payments include : |
| A. | Gifts received from a friend |
| B. | rent free accommodation by the employer |
| C. | net factor income from abroad |
| D. | Employee's contribution to social security |
| Answer» D. Employee's contribution to social security | |
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Explanation: A transfer payment is a oneway payment of money for which no money, good, or service is received in exchange. Governments use such payments as means of income redistribution by giving out money under social welfare programs such as social security, old age or disability pensions, student grants, unemployment compensation, etc. Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses |
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| 23. |
Capacity utilization - |
| A. | is usually near 100 percent. |
| B. | represents the percent of the labour force that is employed. |
| C. | is a measure of the proportional of the existing capital stock used for current production. |
| D. | rises as the economy moves into a recession, since firms must replace unemployed workers with some other resources to maintain production. |
| Answer» C. is a measure of the proportional of the existing capital stock used for current production. | |
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Explanation: Capacity utilisation refers to the extent or level to which the productive capacity of a plant, firm, or country is used in generation of goods and services. Expressed usually as a percentage, it is computed by dividing the total capacity with the portion being utilized. |
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| 24. |
Apart from the availability of raw material location of an industry is also dependent on the availability of: |
| A. | enviornmental protection and vegetation |
| B. | man power and energy source |
| C. | transport and bio energy |
| D. | water and inputs |
| Answer» B. man power and energy source | |
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Explanation: Some of the factors which affect the industrial location are as follows: availability of raw materials, avail-ability of labour, availability of capital, availability of power, availability of market and infrastructure. good supply of labor is one of the traditional factors that is indispensable for industry. Besides, availability of power/electricity is also a deciding factor. |
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| 25. |
What happens when there is a demand deficiency in an economy? |
| A. | Poverty |
| B. | Stagnation |
| C. | Recession |
| D. | Inflation |
| Answer» B. Stagnation | |
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Explanation: Deficient demand refers to the situation when aggregate demand for goods and services falls short of aggregate supply of output which is produced by fully employing the given resources of the economy. This deficient demand leads to the decrease in output, employment and prices in the economy. According to Malthus, deficiency of demand could lead to stagnation in which both capital and labor are redundant relative to the opportunities for employing them profitably. |
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| 26. |
Which one of the following is not a feature of monopoly? |
| A. | Single seller of the product |
| B. | Heavy selling costs |
| C. | Barriers to entry of new firms |
| D. | Price discriminations |
| Answer» B. Heavy selling costs | |
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Explanation: Heavy selling cost is one of the defining features of an oligopoly. Firms resort to heavy selling cost to attract customers. Under this market form, the firms have to compete to promote their sale by largely homogenous products, differentiated mainly by heavy advertising and promotional expenditure that ultimately adds to the total selling cost. |
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| 27. |
The supply of labour in the market depends on - |
| A. | the proportion of the population in the labour force |
| B. | the number of person hours put in by each person |
| C. | the size of population |
| D. | All the above |
| Answer» D. All the above | |
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Explanation: Supply of labour in an economy depends upon both economic as well as non- economic factors. It depends upon the size of population, the number of workers available for work out of a given population, the number of hours worked, the intensity of work, the skills of workers, their willingness to work and the mobility of labour. |
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| 28. |
Engel's Law states the relationship between - |
| A. | quantity demanded and price of a commodity |
| B. | quantity demanded and price of substitutes |
| C. | quantity demanded and tastes of the consumers |
| D. | quantity demanded and income of the consumers |
| Answer» D. quantity demanded and income of the consumers | |
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Explanation: Engel's law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. In other words, the income elasticity of demand of food is between 0 and 1. Engel's Law doesn't imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products (in % terms) less than their increases in income. |
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| 29. |
The demand curve for a Giffen good is |
| A. | upward rising |
| B. | downward falling |
| C. | parallel to the quantity axis |
| D. | parallel to the price axis |
| Answer» A. upward rising | |
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Explanation: A Giffen good is a good whose consumption in-creases as its price increases. (For a normal good, as the price increases, consumption decreases.) Thus, the demand curve will be upward instead of down-ward sloping. A Giffen good has an upward sloping demand curve because it is exceptionally inferior. It has a strong negative income elasticity of demand such that when a price changes the income effect outweighs the substitution effect and this leads to perverse demand curve. |
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| 30. |
If the price of Pepsi decreases relative to the price of Coke and 7-Up, the demand for |
| A. | Coke will decrease |
| B. | 7-Up will decrease |
| C. | Coke and 7-Up will increase |
| D. | Coke and 7-Up will decrease |
| Answer» D. Coke and 7-Up will decrease | |
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Explanation: Price elasticity of demand (PED or Ed) is a measure used in economics to show the responsiveness, or elasticity, of the quantity demanded of a good or service to a change in its price. A decrease in the price of a good normally results in an increase in the quantity demanded by consumers because of the law of demand, and conversely, quantity demanded decreases when price rises. So, here the decrease in price of Pepsi will increase in demand for it, while the demand for Coke and 7-Up will decrease because of no change in their price level. |
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| 31. |
The demand curve shows that price and quantity demanded are - |
| A. | directly related only |
| B. | directly proportional and also directly related |
| C. | inversely proportional and aslo inversely related |
| D. | inversely related only |
| Answer» C. inversely proportional and aslo inversely related | |
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Explanation: Law of demand states that consumers buy more of a good when its price is lower and less when its price is higher. It states that the quantity demanded and the prices of a commodity are inversely related, other things remaining constant. That is, if the income of the consumer, prices of the related goods, and preferences of the consumer remain unchanged, then the change in quantity of good demanded by the consumer will be negatively correlated to the change in the price of the good. |
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| 32. |
If the main objective of the government is to raise revenue, it should tax commodities with |
| A. | high elasticity of demand |
| B. | low elasticity of supply |
| C. | low elasticity of demand |
| D. | high income elasticity of demand |
| Answer» C. low elasticity of demand | |
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Explanation: The Ramsey rule states that commodities with low elasticities of demand should be taxed at higher rates than commodities with high elasticities of demand. However, low- income people might spend a higher proportion of their incomes on commodities with low elasticities of demand (food, clothing, and so on) than might high-income people. Consequently, following the Ramsey rule may result in a regressive taxation scheme society may view as inequitable. |
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| 33. |
Monopoly means - |
| A. | single buyer |
| B. | many sellers |
| C. | single seller |
| D. | many buyers |
| Answer» C. single seller | |
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Explanation: A Monopoly exists when a specific person or enterprise is the only supplier of a particular commodity, This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few entities dominating an industry. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods |
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| 34. |
Kinked demand curve is a feature of - |
| A. | Monopoly |
| B. | Oligopoly |
| C. | Monopsony |
| D. | Duopoly |
| Answer» B. Oligopoly | |
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Explanation: The kinked demand curve theory is an economic theory regarding oligopoly and monopolistic competition. Kinked demand was an initial attempt to explain sticky prices. |
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| 35. |
Demand for complementary goods is known as - |
| A. | Joint demand |
| B. | Derived demand |
| C. | Direct demand |
| D. | Cross demand |
| Answer» A. Joint demand | |
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Explanation: Demand for complementary goods is called Joint Demand. Joint Demand is the demand in which goods are related in such a way that an increase in the demand for one causes an increase in the demand for the other. |
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| 36. |
Quasi rent is a phenomenon. |
| A. | medium term |
| B. | long term |
| C. | short term |
| D. | no time |
| Answer» C. short term | |
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Explanation: Quasirent is a term in economics that describes certain types of returns to firms. It differs from pure economic rent in that it is a temporary phenomenon. It can arise from the barriers to entry that potential competitors face in the short run, such as the granting of patents or other legal protections for intellectual property by governments. |
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| 37. |
Which of the following economists is called the Father of Economics? |
| A. | Malthus |
| B. | Robinson |
| C. | Ricardo |
| D. | Adam Smith |
| Answer» D. Adam Smith | |
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Explanation: Adam Smith, a Scottish moral philosopher and a pioneer of political economy, is cited as the "father of modern economics." He is best known for two classic works: The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). The Wealth of Nations is considered as the first modern work of economics. |
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| 38. |
Perfectly inelastic demand is equal to : |
| A. | One |
| B. | Infinite |
| C. | Zero |
| D. | Greater than one |
| Answer» C. Zero | |
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Explanation: Price Elasticity of Demand is a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price. It measures the responsiveness of demand to changes in price for a particular good. If the price elasticity ofdemand is equal to 0, demand is perfectly inelastic (i.e., demand does not change when price changes). |
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| 39. |
A demand curve, which is parallel to the horizontal axis, showing quantity, has the price elasticity equal to - |
| A. | Zero |
| B. | One |
| C. | Less than one |
| D. | Infinity |
| Answer» D. Infinity | |
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Explanation: Price elasticity of demand measures consumer response to price changes. If consumers are relatively sensitive to price changes, demand is elastic: if they are relatively unresponsive to price changes, demand is inelastic. Perfectly inelastic demand is graphed as a line parallel to the vertical axis; perfectly elastic demand is shown by a line above and parallel to the horizontal axis. When the demand for a commodity is perfectly elastic, the quantity of demand keeps changing with the price. So the coefficient of price elasticity of demand is infinity. |
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| 40. |
'Capital gains' refers to goods which - |
| A. | serve as a source of raising further capital |
| B. | help in the further production of goods |
| C. | directly go into the satisfaction of human wants |
| D. | find multiple uses |
| Answer» B. help in the further production of goods | |
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Explanation: Capital goods are goods that are used in producing other goods, rather than being bought by consumers. They are tangible assets such as buildings, machinery, equipment, vehicles and tools that an organization uses to produce goods or services in order to produce consumer goods and goods for other businesses. |
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| 41. |
From the national point of view, which of the following indicates micro approach? |
| A. | Study of sales of mobile phones by BSNL |
| B. | Unemployement among Women |
| C. | Per capita income in India |
| D. | Inflation in India |
| Answer» A. Study of sales of mobile phones by BSNL | |
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Explanation: Macroeconomics is a branch of economics in which a variety of economy-wide phenomena is thoroughly examined such as, inflation, price levels, rate of growth, national income, gross domestic product and changes in unemployment. On the other hand, Microeconomics studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms. So the study of sales of mobile phones by BSN I, comes under microeconomics. |
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| 42. |
Returns to scale is a - |
| A. | timeless phenomenon |
| B. | directionless phenomenon |
| C. | short-run phenomenon |
| D. | long-run phenomenon |
| Answer» D. long-run phenomenon | |
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Explanation: Returns to Scale refers to changes in production that occur when all resources are proportionately changed in the long run. It comes in three forms--increasing, decreasing, or constant based on whether the changes in production are proportionally more than, less than, or equal to the proportional changes in inputs. It is the guiding principle for long-run production, playing a similar role that the law of diminishing marginal returns plays for short-run production. |
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| 43. |
Rent is a factor payment paid to - |
| A. | land |
| B. | restaurant |
| C. | building |
| D. | factory |
| Answer» A. land | |
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Explanation: Factor Payments refer to payments made to scarce resources, or the factors of production (labour, capital, land, and entrepreneurship), in return for productive services. Wages are paid for the services of labor; interest is the payment for the services of capital rent is the services for land, and profit is the factor payment to entrepreneurship. |
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| 44. |
Plant arid machinery are - |
| A. | Producers' goods |
| B. | Consumers' goods |
| C. | Distributors' goods |
| D. | Free goods |
| Answer» A. Producers' goods | |
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Explanation: Plant and machinery are Producers' goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'. |
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| 45. |
Which activity is not included in production? |
| A. | Production of wheat by a farmer |
| B. | Production of medicines by a company |
| C. | Services given by a nurse in hospital |
| D. | Services done by a house-wife in her own house |
| Answer» D. Services done by a house-wife in her own house | |
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Explanation: Services done by a house-wife in her own house are not included in production. |
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| 46. |
Marginal cost is the - |
| A. | cost of producing a unit of output |
| B. | cost of producing an extra unit of output |
| C. | cost of producing the total output |
| D. | cost of producing a given level of output |
| Answer» B. cost of producing an extra unit of output | |
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Explanation: Marginal cost is the change in total cost that arises when the quantity produced changes by one unit. That is, it is the cost of producing one more unit of a good. In general terms, marginal cost at each level of production includes any additional costs required to produce the next unit. |
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| 47. |
Under hill cost pricing, price is determined - |
| A. | by adding a margin to the average cost |
| B. | by comparing marginal cost and marginal revem |
| C. | by adding normal profit to the marginal cost |
| D. | by the total al cost of production |
| Answer» A. by adding a margin to the average cost | |
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Explanation: Full cost pricing is a practice where the price of a product is calculated by a firm on the basis of its direct costs per unit of output plus a markup to cover overhead costs and profits. Having worked out what averagetotal cost would be if the level of output expected for the next period of time were actually achieved, firms add to this a 'satisfactory' profit margin. This is known as 'full-cost' pricing. The price is equal to 'full' cost, including an acceptable profit. |
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| 48. |
As output increases, average fixed cost |
| A. | increases |
| B. | falls |
| C. | remains consl ant |
| D. | first increases, then falls |
| Answer» B. falls | |
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Explanation: Average fixed cost refers to fixed costs of production (FC) divided by the quantity (Q) of output produced. It is a per-unit-of-output measure of fixed costs. As the total number of goods produced increases, the average fixed cost decreases because the same amount of fixed costs is being spread over a larger number of units of output. |
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| 49. |
Fixed cost is known as - |
| A. | Special cost |
| B. | Direct cost |
| C. | Prime cost |
| D. | Overhead cost |
| Answer» D. Overhead cost | |
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Explanation: Fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs. This is in contrast to variable costs, which are volume-related (and are paid per quantity produced). |
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| 50. |
All of the goods which are scarce and limited in supply are called - |
| A. | Luxury goods |
| B. | Expensive goods |
| C. | Capital goods |
| D. | Economic goods |
| Answer» D. Economic goods | |
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Explanation: In economics, a good is something that is intended to satisfy some wantsor needs of a consumer and thus has economic utility. An economic good is a consumable item that is useful to people but scarce in relation to its demand, so that human effort is required to obtain it. In contrast, free goods (such as air) are naturally in abundant supply and need no conscious effort to obtain them. |
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