The equilibrium price in the market is determined by the
(a) equality between marginal cost and average cost.
(b) equality between total cost and total revenue.
(c) equality between average cost and average revenue.
(d) equality between marginal cost and marginal revenue
Solution: (d)
The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded. This is the point at which the demand and supply curves in the market intersect. Both under perfect competition and monopolistic competition, the firm is in equilibrium at the point of equality of marginal cost and marginal revenue. (MC = MR).
One of the features of a free market economy is
(a) active state intervention
(b) public ownership of factors of production
(c) rationing and price control
(d) consumer’s sovereignty
Solution: (d)
Consumer Sovereignty is one of the features of a free market economy. It refers to the assertion consumer preferences determine the production of goods and services. In a free market system, market performance is in fact responsive to the specific wants of the consumers within the system.
A surplus budget is recommended during :
(a) Boom
(b) Depression
(c) Famines
(d) War
Solution: (b)
Surplus budget is a budget in which government receipts are greater than government expenditures. Such a budget is desired when the economy is battling inflation due to excess aggregate demand (AD). Surplus budget plugs the inflationary gap by lowering the level of aggregate demand. AD is lowered on account of (i) rise in revenue collection by the government, and (ii) fall in government expenditure.
When income increases, consumption also increases :
(a) in a lower proportion
(b) in a higher proportion
(c) in the same proportion
(d) None of the options
Solution: (a)
According to the Keynesian Consumption theory, “men are disposed, as a rule and on average, to increase their consumption as their income increases, but not by as much as the increase in their income.” Another feature of consumer behavior is that when income increases, people do not spend their entire incremental income on consumption. They save a part of it for their financial security during the period of unemployment, illness, etc. In simple words, the marginal propensity to consume decreases, i.e., households spend a decreasing proportion of marginal income on consumption. That is why families on lower income scale save a lower percentage of their income and those on higher scale of income save a larger proportion of their income.
Barter transactions mean
(a) Goods are exchanged with gold.
(b) Coins are exchanged for goods.
(c) Money acts as a medium of exchange.
(d) Goods are exchanged with goods
Solution: (d)
Barter is a system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. Barter, as a replacement for money as the method of exchange, is used in times of monetary Barter is a system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. Barter, as a replacement for money as the method of exchange, is used in times of monetary
The Ability Principle of Taxation is given by
(a) Adam Smith
(b) Edgeworth
(c) Joan Robinson
(d) J.S.Mill
Solution: (a)
The ‘Ability-to-Pay’ principle of Taxation is one of the canons of taxation proposed by Adam Smith in his ‘Wealth of Nations.’It is a progressive taxation principle that maintains that taxes should be levied according a taxpayer’s ability to pay. It is concerned with the equitable distribution of taxes according to the stated taxable capacity or ability to pay of an individual or group. The emphasis in this approach is put on redistribution of income.
The average Fixed Cost Curve is
(a) Upward sloping
(b) ‘U’ shaped
(c) ‘V-shaped
(d) Downward sloping
Solution: (d)
The Average Fixed Cost Curvegraphically represents the relation between average fixed cost incurred by a firm in the short-run product of a good or ser vice and the quantity produced. it is relatively high at small quantities of output, then declines as production increases. It is downward sloping because as output increases, the firm spreads its fixed costs over larger and larger amounts of output.
Situation Analysis is useful for:
(a) Analysis of Capital Market
(b) SWOT Analysis
(c) Capital Market
(d) Analysis of Capital Market and Capital Market
Solution: (b)
Three of the four options in the question are identical. Situation analysis refers to a collection of methods that managers use to analyze an organization’s internal and external environment to understand the organization’s capabilities, customers, and business environment. It is useful for Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis in which internal strengths and weaknesses of an organization, and external opportunities and threats faced by it are closely examined to chart a strategy.
Market segmentation is:
(a) Group of Sales Persons
(b) Dividing target groups as per their needs
(c) Market Division
(d) Market Space
Solution: (b)
Market segmentation is a marketing strategy which refers to the aggregating of prospective buyers into groups, or segments, having similar needs, wants, or demand characteristics. Its objective is to design a marketing mix that precisely matches the expectations of customers in the targeted segment.
Which of the following curve describes the variation of household expenditure on a particular good with respect to household income?
(a) Demand curve
(b) Engel curve
(c) Great Gatsby curve
(d) Cost curve
Solution: (b)
In microeconomics, an Engel curve describes how household expenditure on a particular good or service varies with household income. The curve is named after the German statistician Ernst Engel (1821–1896), who was the first to investigate this relationship between goods expenditure and income systematically in 1857.
