Tag: price mechanism and solutions

Questions Related to price mechanism and solutions

If resources are abundant, then opportunity costs will be _________.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. infinity

  2. increasing trend

  3. decreasing trend

  4. zero

Show answer
Correct Option: D
Explanation:

If resources are abundant then while producing extra unit of a commodity the producer does not has to shift resources from production of another commodity and there will be no decrease in the production of another commodity. So the opportunity cost will remain the zero in this case. 

Which of the following is correct?

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Normative economics is not concerned with value judgement.

  2. A market is a process that reconciles consumer decision, production decisions and labour decisions.

  3. A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy.

  4. Both (B) and (C)

Show answer
Correct Option: D
Explanation:

a) A market is a process that reconciles consumer decision, production decisions and labour decisions.
b) A mixed economy has a certain level of government intervention in the economy along with private sector ownership of the economy.
Both these above statements are correct. 
Market equilibrium is determined by the consumer decision, production decision and labour decisions.
In a mixed economy, decisions are taken by both the private as well as public sectors of economy.

Law of Variable Proportions is applicable to ________.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Medium-run

  2. Short-run

  3. Long-run

  4. All of the above

Show answer
Correct Option: B
Explanation:

Law of Variable Proportions is applicable to - short rum. Law of variable proportion exhibits the relationship between the change of output in respect to the change in only one variable factor, only in short run economy. It involves three phases of production, namely, increasing returns, diminishing returns and negative returns.

What is the full form of DFEC?

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Devaluated Foreign Exchange Control

  2. Direct Foreign Exchange control

  3. Duty Free Export Credit

  4. Direct Free Export Control

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Correct Option: C
Explanation:

DFEC stands for Duty Free Export Credit which refers to the scheme that allowed credit sales of export goods on which export duty or taxes were subsidies. 

Scheme of Subsidies for setting up industries in backward regions leads to __________________.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Balanced Regional Development

  2. Socially-Beneficial Capital Formation

  3. Both (a) and (b)

  4. Neither (a) nor (b)

Show answer
Correct Option: C
Explanation:
Scheme of Subsidies for setting up industries in backward regions leads to -a) Balanced Regional Development
b) Socially-Beneficial Capital Formation
Subsidies will help to uplift the standard of living of the people living in backward regions which will generate greater per capita income,, which in turn will promote economic development.

The price of tomatoes increases and people buy tomato puree you infer that tomato puree and tomatoes are.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Normal goods

  2. Complements

  3. Substitutes

  4. Inferior goods

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Correct Option: C
Explanation:

Tomatoes and tomato puree(sauce) are example of substitutes.

Which of the following is a reason for the negative slope of the PPF?

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Inverse relationship between the use of technology and the use of natural resources.

  2. Scarcity, i.e., at any point in time we have limited amount of productive resources.

  3. Resource specialisation.

  4. Increasing opportunity costs.

Show answer
Correct Option: B
Explanation:

The slope of production possibility curve represents the marginal opportunity cost, which refers to the additional sacrifice that would have to be made when resources and technology are shifted from production of one commodity to the other owing to limited resources. This opportunity cost between two goods is increasing which is denoted through the negative slope of PPC.

_____ is the main organisation for implementing Multilateral trade agreements.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. IMF

  2. WTO

  3. World Bank

  4. All of these

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Correct Option: B
Explanation:

World Trade Organisation is an apex organisation that regulates trade between all the countries under some rules and regulations set up by the organisation with negotiation with all the countries under trade. They facilitates smooth flow of goods and services between various countries which are in trade agreement. 

Discovery of new technical knowledge and improvements in technology leads to _____________________.

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. Internal Economies of Scale

  2. Internal Diseconomies of Scale

  3. External Economies of Scale

  4. External Diseconomies of Scale

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Correct Option: C
Explanation:

External economies of scale take place when an entire business grows larger and firms benefit from subordinate long-run average costs. External economies of scale can also be referred to as positive external benefits of industrial development.

External economies of scale describe comparable conditions, only for complete manufacturing instead of a company. For example, if the city creates an enhanced transportation network to service a particular industry, then all companies in that industry will benefit from the new transport network, and experience decrease production costs.

The correct option is C.

Inflation means:

economics solution to basic economic problems under different economic systems supply curve and price determination in the market price mechanism and solutions supply

  1. High prices

  2. Prices must be continuously rising

  3. Both (A) and (B)

  4. None of the above

Show answer
Correct Option: B
Explanation:

Inflation which is often expressed in percentage is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time continuously which indicates a decrease in the purchasing power of a nation's currency.