Question:

Economic efficiency for the entire economy requires that :

A.

Potential gains to anyone necessitate losses to another

B.

All goods be produced at their lowest possible opportunity costs

C.

Maximum-valued output is obtained from given resource

D.

All of the above

Answer» d. All of the above

Question:

Which one of the following is an example of close substitute:

A.

Tea and Coffee

B.

Milk and water

C.

Bread and Butter

D.

Pen and pencil

Answer» a. Tea and Coffee

Question:

If a small change in price leads to infinitely large change in quantity demanded, then the demand is:

A.

Perfectly elastic

B.

Perfectly inelastic

C.

Elastic

D.

Inelastic

Answer» b. Perfectly inelastic

Question:

Entrepreneurs will have no tendency to expand or contract output and employment when

A.

AD>AS

B.

AD<AS

C.

AD=AS

D.

None of the above

Answer» c. AD=AS

Question:

The interest rate paid on bonds is known as:

A.

Call rate

B.

Coupon rate

C.

Repo rate

D.

Bank rate

Answer» b. Coupon rate

Question:

If all resources used in the production of a product are increased by 20 percent andoutput increases by 20 percent, then there must be:

A.

Economies of scale.

B.

Diseconomies of scale.

C.

Constant returns to scale.

D.

Increasing average total costs.

Answer» c. Constant returns to scale.

Question:

When individuals income falls (everything remain the same) his demand fora normal good

A.

rises

B.

falls

C.

remains the same

D.

negative

Answer» b. falls

Question:

As a result of an increase in capital, ceteris paribus, —— the marginal productivity of labour:

A.

Remains constant

B.

Increase

C.

decreases

D.

none of these

Answer» b. Increase

Question:

Which of the following causes an increase in supply:

A.

Fall in price of inputs

B.

Increase in number of producers

C.

Decrease in the price of production substitutes

D.

All of the above

Answer» d. All of the above

Question:

The reason the marginal cost curve eventually increases as output increases for the typical firm is because:

A.

Of diseconomies of scale.

B.

Of minimum efficient scale.

C.

Of the law of diminishing returns.

D.

Normal profit exceeds economic profit.

Answer» c. Of the law of diminishing returns.