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) .
| 51. |
The terms "Micro Economics" and "Macro Economics" were coined by - |
| A. | Alfred Marshall |
| B. | Ragner Nurkse |
| C. | Ragner Frisch |
| D. | J.M. Keynes |
| Answer» C. Ragner Frisch | |
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Explanation: The terms microeconomics and macroeconomics were coined by Professor Ragnar Frisch of Oslo University for the first time in 1933 and since then they gained popularity and were widely used by other economists. Now they have become an integral part of economic terminology. Ragnar Anton Kittil Frisch was a Norwegian economist and the co-winner with Jan Tinbergen of the first Nobel Memorial Prize in Economic Sciences in 1969. Frisch was one of the founders of economics as a modern science. He made a number of significant advances in the field of economics and coined a number of new words. |
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| 52. |
'Hire and Fire' is the policy of - |
| A. | Capitalism |
| B. | Socialism |
| C. | Mixed Economy |
| D. | Traditional Economy |
| Answer» C. Mixed Economy | |
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Explanation: In capitalism, people may sell or lend their properly, and other people may buy or borrow them. In many countries with mixed economies (part capitalism and part socialism) there are laws about what we can buy or sell, or what prices we can charge, or whom we can hire or fire. |
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| 53. |
Consumption function expresses the relationship between consumption and - |
| A. | savings |
| B. | income |
| C. | investment |
| D. | price |
| Answer» B. income | |
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Explanation: The consumption function is a mathematical formula laid out by famed economist John Maynard Keynes. The formula was designed to show the relationship between real disposable income and consumer spending, the latter variable being what Keynes considered the most important determinant of short-term demand in an economy. |
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| 54. |
The relationship between the rate of interest and level of consumption was first visualized by - |
| A. | Amartya K. Sen |
| B. | Milton Friedman |
| C. | Irving Fisher |
| D. | James Duesenberry |
| Answer» C. Irving Fisher | |
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Explanation: Irving Fisher, in His Theory of Interest (1930), found the relationship between interest rates (nominal interest rate and real interest rate) and the consumption level. Though his theory is about interest rate and inflation, it discusses the effect of real interest rate on savings and gives an inverse relationship between nominal interest rates and consumer expenditures |
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| 55. |
The Liquidity Preference Theory of Interest was propounded by : |
| A. | J.M. Keynes |
| B. | David Ricardo |
| C. | Alfred Marshall |
| D. | Adam Smith |
| Answer» A. J.M. Keynes | |
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Explanation: In macroeconomic theory, liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John May-nard Keynes in his book The General Theory of Employment, Interest and Money (1936) to explain determination of the interest rate by the supply and demand for money. |
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| 56. |
Which of the following is not an economic activity? |
| A. | A labourer working in a factory. |
| B. | A CRPF jawan guarding country’s borders. |
| C. | A teacher teaching his own son. |
| D. | A farmer tilling his own land. |
| Answer» C. A teacher teaching his own son. | |
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Explanation: An activity which is done with the aim of monetary return is called an economic activity, while an activity which is not done with the aim of monetary return is called a non- economic activity. The most quoted example to understand this is that of a teacher. When a teacher teaches students in a school, he is doing economic activity. When the same teacher teaches his son, he is doing non-economic activity. |
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| 57. |
Cosequent upon the recommendations of the Working Group on Rural Banks, 5 Rural Regional Banks were initially set up in the year - |
| A. | 1973 |
| B. | 1974 |
| C. | 1975 |
| D. | 1976 |
| Answer» C. 1975 | |
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Explanation: The Government of India set up Regional Rural Banks (RRBs) on October 2, 1975. Initially, five RRBs were set up on October 2, 1975 which were sponsored by Syndicate Bank, State Bank of India, PunjabNational Bank, United Commercial Bank and United Bank of India: Capital share being 50% by the central government. 15% by the state government and 35% by the scheduled bank. |
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| 58. |
Poverty in less developed countries is largely due to - |
| A. | voluntary idleness |
| B. | income inequality |
| C. | lack of cultural activities |
| D. | lack of intelligence of the people |
| Answer» B. income inequality | |
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Explanation: Despite the developing countries' impressive aggregate growth of the past 25 years, its benefits have only reached the poor to a very limited degree. Not only have the poorest countries grown relatively slowly, but growth processes are such that within most developing countries, the incomes of the poor increase much less than the average. Much of the poverty is due to severe inequality which in turn is due to lop- sided development. Income inequality is the major determinant of poverty both in developed and non-developed countries. Rising unemployment is a major source of spreading poverty. |
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| 59. |
Which unit of valuation is known as "Paper gold"? |
| A. | Eurodollar |
| B. | Petrodollar |
| C. | SDR |
| D. | GDR |
| Answer» C. SDR | |
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Explanation: Paper Gold is a measure of a country's reserve assets in I he international monetary system. It is also called Special Drawing Rights (SDR) which is an international reserve asset, created by the IMF in 1969 to supplement its member countries' official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. SDRs may actually represent a potential claim on IMF member countries' non-gold foreign exchange reserve assets, which are usually held in those currencies. |
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| 60. |
A closed economy is one which - |
| A. | Does not trade with other countries |
| B. | Does not possess any means of international transport |
| C. | Does not have a coatastal line |
| D. | (4) Is not a member of the U.N.O. |
| Answer» A. Does not trade with other countries | |
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Explanation: A closed economy is one that has no exports or imports. An open economy is one that has exports and imports. In a closed economy, domestic quantity and domestic price entirely determine producer surplus and consumer surplus. In a closed economy, equilibrium price and equilibrium quantity determine consumer surplus and producer surplus. |
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| 61. |
Who are the creditors of a Corporation? |
| A. | Bond holders |
| B. | Stock holders |
| C. | Both Bond and Stock holders |
| D. | Holders of preferred stock |
| Answer» C. Both Bond and Stock holders | |
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Explanation: A creditor is a party (e.g. person, organization, company, or government) that has a claim to the services of a second party. It is a person or institution to whom money is owed. The second party is frequently called a debtor or borrower. An incorporated entity is a separate legal entity that has been incorporated through a legislative or registration process established through legislation. Both bond holders and stock holders are creditors of a corporation. |
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| 62. |
The ratio of a bank's cash holdings to its total deposit liabilities is called the - |
| A. | Variable Reserve Ratio |
| B. | Cash Reserve Ratio |
| C. | Statutory Liquidity Ratio |
| D. | Minimum Reserve Ratio |
| Answer» B. Cash Reserve Ratio | |
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Explanation: Cash Reserve Ratio (CRR) is the amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the avail-able amount with the bankscomes down. The RBI uses the CRR to drain out excessive money from the system. |
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| 63. |
The smaller the Cash Reserve Ratio, the scope for lending by banks is : |
| A. | greater |
| B. | smaller |
| C. | weaker |
| D. | lesser |
| Answer» A. greater | |
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Explanation: Cash Reserve Ratio is a regulation set by Central bank (RBI in India) which dictates the minimum amount (reserves) (hata commercial bank must be held to customer notes and deposits. A decrease in CRR will make it mandatory for the banks to hold a lesser proportion of (heir deposits in the form of deposits with the RBI. |
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| 64. |
For hannelizing the unaccounted money for productive purposes the Government Introduced the scheme of : |
| A. | Special Bearer Bonds |
| B. | Resurgent. India Bonds |
| C. | Provident Funds |
| D. | Market Loans |
| Answer» A. Special Bearer Bonds | |
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Explanation: The Special Bearer Bonds (Immunities And Exemptions) Act, 1981 laid down the purpose of such bonds as necessary to canalize for productive purposes black money which has become a serious threat to the national economy. With a view to such canalization, the Central Government decided to issue at par certain bearer bonds to be known as the Special Bearer Bonds, 1991. |
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| 65. |
Saving is that portion of money income that is - |
| A. | spent for development of Industries |
| B. | not spent on consumption |
| C. | spent on health and education |
| D. | spent for consumer durables |
| Answer» B. not spent on consumption | |
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Explanation: Saving is income not spent, or deferred consumption. In economics, it refers to any income not used for immediate consumption- consuming less out of a givenamount of resources in the present in order to consume more in the future. Saving, therefore, is the decision to defer consumption and to store this deferred consumption in some form of asset. |
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| 66. |
What is the role of "Ombudsman" in a bank? |
| A. | To provide quality and speedy redressal of grievances of customers. |
| B. | To provide suggestions for innovative schemes in the banks. |
| C. | To inspect the internal working of the branches. |
| D. | To monitor the poverty alleviation programmes under-taken by or implemented by the bank. |
| Answer» A. To provide quality and speedy redressal of grievances of customers. | |
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Explanation: The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995. |
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| 67. |
Which of the following taxes is not collected by the Central Government? |
| A. | Income tax |
| B. | Customs duty |
| C. | Professional tax |
| D. | Excise duty |
| Answer» C. Professional tax | |
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Explanation: A professional tax, also known as an occupation tax or a professional privilege lax, is a tax that a professional must pay to receive the right to practice a professional service. Many state and local governments collect professional tax, and a professional who has clients in more than one state may owe professional taxes in several states. |
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| 68. |
The permission given to a bank customer to draw cheques in excess of his current account balance is called - |
| A. | a personal loan |
| B. | an ordinary loan |
| C. | discounting a bill of exchange |
| D. | an overdraft |
| Answer» D. an overdraft | |
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Explanation: Overdrafts is an extension of credit from a lending institution when an account reaches zero. An overdraft allows the individual to continue withdrawing money even if the account has no funds in it. Basically the bank allows people to borrow a set amount of money. An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn." |
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| 69. |
Forced Savings refer to - |
| A. | Reduction of consumption consequent to a rise in prices |
| B. | Taxes on individual income and wealth |
| C. | Compulsory deposits imposed on income tax payers |
| D. | Provident fund contribution of private sector employees |
| Answer» A. Reduction of consumption consequent to a rise in prices | |
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Explanation: Forced saving is an economic situation in which consumers spend less than their disposable income, not because they want to save but because the goods they seek are not available or because goods are too expensive. In a free economy, this situation would normally result in increase in prices and inflow of more goods. |
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| 70. |
Which of the following is an indirect tax? |
| A. | Capital Gains Tax |
| B. | Excise Duty |
| C. | Wealth Tax |
| D. | Estate Duty |
| Answer» B. Excise Duty | |
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Explanation: Some examples of indirect taxes include value added tax, excise duty, sales tax, stamp duty and custom duty levied on imports. These are taxes levied by the slate on expenditure and consumption, but not on property or income. |
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| 71. |
Say's Law of Market holds that - |
| A. | supply is not equal to demand |
| B. | supply creates its own demand |
| C. | demand creates its own supply |
| D. | supply is greater than demand |
| Answer» B. supply creates its own demand | |
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Explanation: Say's law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767-1832), who stated that "supply creates its own demand". "Supply creates its own demand" is the formulation of Say's law by John Maynard Keynes. The rejection of this doctrine is a central component of The General Theory of Employment, Interest and Money (1936) and a central tenet of Keynesian economics. |
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| 72. |
'Marginal efficiency of capital' is - |
| A. | expected rate of return on new investment |
| B. | expected rate of return of existing investment |
| C. | difference between rate of profit and rate of interest |
| D. | value of output per unit of capital invested |
| Answer» A. expected rate of return on new investment | |
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Explanation: The volume of investment depend upon the following two factors: (1) rate of interest: and (2) marginal efficiency of capital. Before investing the money a businessman compares interest with the rale of marginal efficiency capital. If they expect that rate of profit will be greater than the rate of interest, then they invest the money otherwise not. The expected rate of return on capital is called the marginal efficiency of capital. In other words, marginal efficiency of capital is a return on investment which is based partly on expectations of future yields and partly on the actual price of the capital good concerned. |
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| 73. |
National Income is the - |
| A. | Net National Product at market price |
| B. | Net National Product at factor cost |
| C. | Net Domestic Product at market price |
| D. | Net domestic Product at factor cost |
| Answer» B. Net National Product at factor cost | |
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Explanation: Net National Product. at factor cost is also called as national income. Net National Product at factor cost is equal to sum total of value added at factor cost or net domestic product at factor cost and net factor income fromabroad. NNP al factor cost = NNP at Market Price -Net. Indirect Tax. National income measures the money value of the flow of output of goods and services produced within an economy over a period of Lime. |
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| 74. |
What is meant by 'Capital Gain'? |
| A. | Part of profits added to the capital |
| B. | Appreciation in the money value of assets |
| C. | Additions to the capital invested in a business |
| D. | None of these |
| Answer» B. Appreciation in the money value of assets | |
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Explanation: A capital gain is a profit that results from a disposition of a capital asset, such as stock, bond or real estate, where the amount realized on the disposition exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price. Capital gains may refer to "investment income" that arises in relation to real assets. In other words, a capital gain represents an appreciation in value accruing over a prescribed period of time on the asset. |
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| 75. |
Backward bending supply curve belongs to which market? |
| A. | Capital |
| B. | Labour |
| C. | Money |
| D. | Inventories |
| Answer» B. Labour | |
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Explanation: In economics, backward bending supply curve is related to labour. Also known as backward-bending supply curve of labour, This curve models a situation where workers choose to substitute leisure time for work time, i.e. wages, thus reducing the pool of labour available. It shows how the change in real wage rates affects the number of hours worked by employees. |
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| 76. |
Interms of economics, if it is possible to make someone better off without making someone worse off, then the situation is - |
| A. | Inefficient |
| B. | Efficient |
| C. | Optimal |
| D. | Paretosuperior |
| Answer» A. Inefficient | |
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Explanation: Pareto efficiency is said to occur when it is impossible to make one party better off without making some-one worse off. An inefficient situation is one where it possible to make some people better off without making anyone else worse off. |
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| 77. |
The theory of distribution relates to which of the following? |
| A. | The distribution of assets |
| B. | The distribution of income |
| C. | The distribution of factor payments |
| D. | Equality in the distribution of the income and wealth |
| Answer» D. Equality in the distribution of the income and wealth | |
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Explanation: In economics, distribution theory is the systematic attempt to account for the sharing of the national income among the owners of the factors of production—land, labour, and capital. Traditionally, economists have studied how the costs of these factors and the size of their return—rent, wages, and profits—are fixed. The theory of distribution involves three distinguishable sets of questions. First, how is the national income distributed among persons? Second, what determines the prices of the factors of production? Third, how is the national income distributed proportionally among the factors of production? |
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| 78. |
Knowledge, technical skill, education etc. in economics, are regarded as - |
| A. | social-overhead capital |
| B. | human capital |
| C. | tangible physical capital |
| D. | working capital |
| Answer» B. human capital | |
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Explanation: Human capital is the stock of competencies, knowledge, social and personality attributes, including creativity, embodied in the ability to perform labor so as to produce economic value. It is an aggregate economic view of the human being acting within economies, which is an attempt to capture the social, biological, cultural and psychological complexity as they interact in explicit and/or economic transactions. |
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| 79. |
Purchasing Power Parity theory is related with - |
| A. | Interest rate |
| B. | Bank rate |
| C. | Wage rate |
| D. | Exchange rate |
| Answer» D. Exchange rate | |
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Explanation: Purchasing power parity (PPP) is an economic theory and a technique used to determine the relative value of currencies, estimating the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to (or on par with) each currency's purchasing power. It asks how much money would be needed to purchase the same goods and services in two countries, and uses that to calculate an implicit foreign exchange rate. Using that PPP rate, an amount of money thus has the same purchasing power in different countries. |
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| 80. |
The demand for which of the following commodity will not rise in spite of a fall in its price? |
| A. | Television |
| B. | Refrigerator |
| C. | Salt |
| D. | Meat |
| Answer» C. Salt | |
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Explanation: For certain goods called necessities, demand is not related to income. Demand for salt does not increase with the increase in income & does not decrease with the decrease in income. It means that it is irrespective of income. The demand curve slopes downward for goods like salt, but it is inelastic. |
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| 81. |
In the long-run equilibrium, a competitive firm earns - |
| A. | Super-normal profit |
| B. | Profits equal to other firms |
| C. | Normal profit |
| D. | No profit |
| Answer» C. Normal profit | |
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Explanation: Making the assumption that the market demand curve remains unchanged, higher market supply will reduce the equilibrium market price until the price = long run average cost. At this point each firm is making normal profits only. There is no further incentive for movement of firms in and out of the industry and a long-run equilibrium has been established. |
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| 82. |
What is selling cost? |
| A. | Cost incurred on transportation of commodities to market |
| B. | Cost incurred on promoting the sale of the product |
| C. | Cost incurred on commission and salaries personnel |
| D. | Cost incurred on advertisement |
| Answer» B. Cost incurred on promoting the sale of the product | |
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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. |
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| 83. |
Who said, "Economics is the Science of Wealth"? |
| A. | Robbins |
| B. | J.S. Mill |
| C. | Adam Smith |
| D. | Keynes |
| Answer» C. Adam Smith | |
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Explanation: It was Adam Smith who conceptualized Economics as a science of wealth. Elaborating upon the scope and fundamental conceptualizations of the new science, he then called political economy as "an inquiry into the nature and causes of the wealth of nations." |
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| 84. |
The addition to total cost by producing an additional unit of out-put by a firm is called - |
| A. | Variable cost |
| B. | Average cost |
| C. | Marginal cost |
| D. | Opportunity cost |
| Answer» C. Marginal cost | |
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Explanation: The addition to total cost by producing an additional unit of output by a firm is called Marginal cost. Average cost is the total cost of producing a given output divided by that output. |
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| 85. |
In a perfectly competitive market, a firm's - |
| A. | Average Revenue is always equal to Marginal Revenue |
| B. | Marginal Revenue is more than Average Revenue |
| C. | Average Revenue is more than Marginal Revenue |
| D. | Marginal Revenue and Average Revenue are never equal |
| Answer» A. Average Revenue is always equal to Marginal Revenue | |
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Explanation: Average revenue is the amount money received by a firm per unit of output sold. Marginal revenue is the change in total revenue resulting from a small change in the quantity sold. In a perfectly competitive market, a firm's Average Revenue is always equal to Marginal Revenue. |
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| 86. |
An increase in the quantity supplied suggests - |
| A. | a leftward shift of the supply curve |
| B. | a movement up along the supply curve |
| C. | a movement down along the supply curve |
| D. | a rightward shift of the supply curve |
| Answer» B. a movement up along the supply curve | |
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Explanation: Like the law of demand, the law of supply demonstrates the quantities that will be sold at a certain price. But unlike the law of demand, the supply relationship shows an upward slope. This means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at an higher price increases revenue. |
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| 87. |
Price and output are determinates in market structure other than - |
| A. | monopoly |
| B. | perfect competition |
| C. | oligopoly |
| D. | monopsony |
| Answer» B. perfect competition | |
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Explanation: Perfect competition is a form of market in which there are a large number of buyers and sellers competing with each other in the purchase and sale of goods, respectively and no individual buyer or seller has any influence over the price and output. Each firm's output is a perfect substitute for the output of the other firms. so the demand for each firm's output isperfectly elastic. Product differentiation holds the key in this type of market structure. |
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| 88. |
Bilateral monopoly situation is |
| A. | when there are only two sellers of a product |
| B. | when there are only two buyers of a product |
| C. | when there is only one buyer and one seller of a product |
| D. | when there are two buyers and two sellers of a product |
| Answer» C. when there is only one buyer and one seller of a product | |
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Explanation: Bilateral monopoly is a market consisting of a single seller (monopolist) and a single buyer (monopsonist).For example, if a single firm produced all the copper in a country and if only one firm used this metal, the copper market would be a bilateral monopoly market. The equilibrium in such a market cannot be determined by the traditional tools of demand and supply. |
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| 89. |
A 'Market Economy' is one which - |
| A. | is controlled by the Government |
| B. | is free from the Government control |
| C. | in influenced by international market forces |
| D. | All of these |
| Answer» B. is free from the Government control | |
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Explanation: A market economy is an economic system in which economic decisions and the pricing of goods and services are guided solely by the aggregate interactions of a country's individual citizens and businesses. There is little government intervention or central planning. The United States is the world's premier market economy |
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| 90. |
The law of demand states that - |
| A. | if the price of a good increases, the demand for that good decreases. |
| B. | if the price of a good increases, the demand for that good increases. |
| C. | if the price of a good increases, the quantity demanded of that good decreases |
| D. | if the price of a good increases, the quantity demanded of that good increases. |
| Answer» C. if the price of a good increases, the quantity demanded of that good decreases | |
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Explanation: The law of demand states that, other things remaining the same, the quantity demanded of a commodity is inversely related to its price. Thus, according to the law of demand, there is an inverse relationship between price and quantity demanded, other things remaining the same. |
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| 91. |
The demand curve facing a perfectly competitive firm is - |
| A. | downward sloping |
| B. | perfectly inelastic |
| C. | a concave curve |
| D. | perfectly elastic |
| Answer» D. perfectly elastic | |
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Explanation: A perfectly competitive industry is comprised of a. large number of relatively small firms that sell identical products. Each perfectly competitive firm is so small relative to the size of the market that it has no market control, it has no ability to control the price. In other words, it can sell any quantity of output it wants at the going market price. This translates into a horizontal or perfectly elastic demand curve. |
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| 92. |
If average cost falls, marginal cost - |
| A. | increases at a higher rate |
| B. | falls at the same rate |
| C. | increases at a lower rate |
| D. | falls at a higher rate |
| Answer» B. falls at the same rate | |
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Explanation: Average cost is the per unit cost incurred in the production of a good or service. It is specified as the total cost divided by the quantity of output. The marginal cost (the additional, cost of producing one more unit of output) and average cost are related. So when average total cost rises, marginal cost also rises; when average cost curve falls with the increase in output, the marginal cost also rises. |
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| 93. |
Consumer gets maximum satisfaction at the point where - |
| A. | Marginal Utility = Price |
| B. | Marginal Utility > Price |
| C. | Marginal Utility < Price |
| D. | Marginal Cost = Price |
| Answer» A. Marginal Utility = Price | |
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Explanation: As per the law of diminishing marginal utility, the utility of each successive unit goes on diminishing as more and more units of a commodity are consumed. A rational consumer will consume the commodity up to a point where the marginal utility of the final unit of the commodity is equal to the marginal utility of money (in terms of price) paid for it. In this way, the consumer will get the maximum satisfaction and will be in equilibrium. |
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| 94. |
Micro-economics is also called : |
| A. | Income theory |
| B. | Investment theory |
| C. | Price theory |
| D. | Expenditure theory |
| Answer» C. Price theory | |
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Explanation: Microeconomics is the branch of economics concerned with isolated parts of the economy, for example, individual people, firms or industries. It involves such topics as the theory of prices and of the firm. |
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| 95. |
Demand in Economics means : |
| A. | Aggregate demand |
| B. | Market demand |
| C. | Individual demand |
| D. | Demand backed by purchasing power |
| Answer» D. Demand backed by purchasing power | |
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Explanation: Demand ' in Economics refers to the quantity of a good or service consumers ate able and willing to buy at a given price in a given market during a specified time period , other things beings equal. |
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| 96. |
A fall in demand or rise in supply of a commodity— |
| A. | Increases the price of that commodity |
| B. | decreases the price of that commodity |
| C. | neutralizes the changes in the price |
| D. | determines" the price elasticity |
| Answer» B. decreases the price of that commodity | |
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Explanation: The four basic laws of supply and demand are: (1) If demand increases and supplyremains unchanged, a shortage occurs, leading to a higher price: (2) If demand decreases and supply remains unchanged, a surplus occurs, leading to a lower price; (3) If demand remains unchanged and supply increases, a surplus occurs, leading to a lower price; and (4) If demand remains unchanged and supply decreases, a shortage occurs, leading to a higher price. |
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| 97. |
The relationship between the value of money and the price level in an economy is - |
| A. | Direct |
| B. | Inverse |
| C. | Proportional |
| D. | Stable |
| Answer» B. Inverse | |
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Explanation: The basic causal relationship between the price level and the value of money is that as the price level goes up, the value of money goes down. The "value of money" refers to what a unit of money can buy whereas the "price level" refers to the average of all of the prices of goods and services in a given economy. |
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| 98. |
Production function relates - |
| A. | Cost to output |
| B. | Cost to input |
| C. | Wages to profit |
| D. | Inputs to output |
| Answer» D. Inputs to output | |
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Explanation: Production function specifies the output of a firm, an industry, or an entire economy for all combinations of inputs. The relationship of output to inputs is non-monetary; that is, a production function relates physical inputs to physical outputs, and prices and costs are not reflected in the function. |
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| 99. |
If total utility is maximum at a point, then marginal utility is - |
| A. | positive |
| B. | zero |
| C. | negative |
| D. | positive but decreasing |
| Answer» B. zero | |
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Explanation: Marginal utility of a good or service is the gain (or loss) from an increase (or decrease) in the consumption of that good orservice. As the rate of commodity acquisition increases, marginal utility decreases. If commodity consumption continues to rise, marginal utility at some point falls to zero, reaching maximum total utility. Further increase in consumption of units of commodities causes marginal utility to become negative; this signifies dissatisfaction. |
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| 100. |
Economies of Scale means reduction in |
| A. | unit cost of production |
| B. | unit cost of distribution |
| C. | total cost of production |
| D. | total cost of distribution |
| Answer» A. unit cost of production | |
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Explanation: In microeconomics, economies of scale are the cost advantages that an enterprise obtains due to expansion. "Economies of scale" is a long run concept and refers to reductions in unit cost as the size of a facility and the usage levels of other inputs increase. |
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