When the average product of an input is at its maximum then: (AP= Average product) (MP= Marginal product)
(a) AP = 0
(b) AP = MP
(c) AP > MP
(d) AP < MP
Solution: (b)
There is a close relationship between marginal product and average product because both are derived from total product. When marginal product is equal to average product, the average product is at its maximum. In the short-run production function, since marginal product starts off as greater than average product and then falls below average product, we can assume that at the “cross-over point,” when MP = AP, AP is at its maximum.
Equilibrium output is determined by:
(a) the equality between total Variable cost and Marginal revenue.
(b) the equality between Marginal cost and Marginal revenue.
(c) the equality between Average cost and Average revenue.
(d) the equality between total cost and total revenue.
Solution: (b)
Equilibrium Output refers to the level of output where the Aggregate Demand is equal to the Aggregate Supply (AD = AS) in an economy. It signifies that whatever the producers intend to produce during the year is exactly equal to what the buyers intend to buy during the year. According to MR-MC approach, equilibrium refers to stage of that output level at which Marginal Cost (MC) = Marginal Revenue (MR). As long as MC is less than MR, it is profitable for the producer to go on producing more because it adds to its profits. He stops producing more only when MC becomes equal to MR.
Apart from the availability of raw material location of an industry is also dependent on the availability of:
(a) Environmental protection and vegetation
(b) manpower and energy source
(c) transport and bioenergy
(d) water and inputs
Solution: (b)
Some of the factors which affect the industrial lo cation are as follows: availability of raw materials, availability 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 pow er/electricity is also a deciding factor.
Pump priming should be resorted to at a time of?
(a) Inflation
(b) Deflation
(c) Stagflation
(d) Reflation
Solution: (b)
Pump priming is the action taken to stimulate an economy, usually during a recessionary/deflationary period, through government spending, and interest rate and tax reductions. Growth is accomplished through the increase in purchasing power experienced by those affected by the injection of funds, with the goal of prompting higher demand for goods and services.
The backward bending supply curve belongs to which market?
(a) Capital
(b) Labour
(c) Money
(d) Inventories
Solution: (b)
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 la bour available. It shows how the change in real wage rates affects the number of hours worked by employees.
What are gilt–edged securities?
(a) Securities issued by multinational companies.
(b) Securities issued by the Government
(c) Securities issued by the private sector
(d) Securities issued by the joint venture companies
Solution: (b)
Gilt-edged securities are bonds issued by governments. They are government securities, i.e., instruments issued by the government to borrow money from the market. Gilt-edged securities are a high-grade investment with very low risk.
Short-term contractions and expansions in economic activity are called _____
(a) Expansions
(b) Recession
(c) Deficits
(d) The business cycle
Solution: (d)
The business cycle is the fluctuation in economic activity that an economy experiences over a period of time. It is basically defined in terms of periods of expansion or recession. During expansions, the economy grows in real terms (i.e. excluding inflation), as evidenced by increases in indicators like employment, industrial production, sales and personal incomes. During recessions, the economy contracts, as measured by decreases in the above indicators.
Selling costs have to be incurred in case of
(a) Perfect Competition
(b) Monopoly
(c) Monopolistic Competition
(d) None of the given options
Solution: (c)
Selling cost-s are the expenses on advertisement, salesmanship, free sampling, free service, door-to-door canvassing, and so on. There is no selling problem under perfect competition where the product is homogeneous. Under monopolistic competition where the product is differentiated, selling costs are essential to push up the sales. They are incurred to persuade a buyer to purchase one product in preference to another.
One of the following is ‘Labour’ in Economics.
(a) A Musician performing for a benefit fund
(b) A Painter working for his own pleasure
(c) Reading a book as a hobby
(d) A Mother teaching her own son
Solution: (a)
Labour includes both physical and mental work undertaken for some monetary reward. In this way, workers working in factories, services of doctors, advocates, ministers, officers and teachers are all included in labour. Any physical or mental work which is not undertaken for getting income, but simply to attain pleasure or happiness, is not labour.
The term ‘Macro Economics’ was used by __________.
(a) J.M. Keynes
(b) Ragner Frisch
(c) Ragner Nurkse
(d) Prof. Knight
Solution: (b)
Ragnar Frisch coined the widely-used term pair macroeconomics/microeconomics in 1933. He was a Norwegian economist and the co-recipient of the first Nobel Memorial Prize in Economic Sciences in 1969. He is known for having founded the discipline of econometrics.
