Tag: economics

Questions Related to economics

Price mechanism incorporates _________ in a market economy.

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

  1. rigidity

  2. flexibility

  3. severity

  4. complexity

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Correct Option: B
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e. supply will increase if price increases and vice-versa and the demand sector i.e. demand will increase if price decreases and vice-versa. Therefore, it adds more flexibility to the market economy because in market economy prices affect by the forces of demand and supply.  

Factor remunerations are the payments made by the consumer to purchase services from a firm.

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

  1. True

  2. False

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Correct Option: B
Explanation:

Factor remuneration refers to the payments which are done by the production sector to the private sector for hiring factor service i.e. capital, labour, land, and entrepreneurship in the form of interest, wages, rent, and profits respectively. 

Goods markets are those markets where ___________ are brought and sold.

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

  1. goods

  2. services

  3. both A & B

  4. neither A nor B

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Correct Option: C
Explanation:

Goods market refers to the market where goods and services which are required by the consumers are bought and sold against a common monetary measure i.e. rupees in case of India. 

In a ____________ economy, the producer operates with the objective of profit-maximisation.

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

  1. planned

  2. socialist

  3. free-enterprise

  4. all of the above

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Correct Option: C
Explanation:

In a free enterprise economy, prices of commodities in the market are affected by the forces of demand and supply that generates open competition in the market which leads to the survival of the fittest due to which profit maximization becomes the ultimate motive of all the producing sector. 

Which among the following is a function of price mechanism?

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

  1. Determination of savings in the economy.

  2. Determination of the level of economic activities.

  3. Guiding force for producers and consumers.

  4. All of the above.

Show answer
Correct Option: D
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa which determines the level of economic activity i.e. profitable activities in the economy with the accurate savings in the economy. 

Which of the following conditions are required for price mechanism to operate in an economy?

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

  1. Existence of competition

  2. No government intervention

  3. Mobility of resources

  4. All of the above

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Correct Option: D
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate smoothly, government intervention needs to be avoided with free flow of all the resources required for the production of the demanded commodities.  

Identify the conditions that are a pre-requisite for the price mechanism to operate.

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

  1. Cost should reflect the sacrifice made in terms of resources.

  2. Producers should be able to anticipate demand correctly.

  3. Demand should reflect needs of the people.

  4. All of the above

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Correct Option: D
Explanation:

Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand sector i.e demand will increase if price decreases and vice-versa. Therefore, price mechanism will operate only when the producer sector will efficiently anticipate the demand by the needs of the people and supply the commodities where cost in the generation of the commodities must be reflected in terms of opportunity cost. 

Price mechanism will operate only when the market is regulated by the government.

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

  1. True

  2. False

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Correct Option: B
Explanation:
Price mechanism refers to the mechanism where price directs the flow of goods and services in the market as it directs the supply by the production sector i.e supply will increase if price increases and vice-versa and the demand by the consumer sector i.e demand will increase if price decreases and vice-versa. Therefore for price mechanism to operate, the market should be free from all types of interventions

Producers compete with each other in capitalist economy to produce those goods and services which yield _________.

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

  1. no profits

  2. higher profits

  3. lower profits

  4. no loss

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Correct Option: B
Explanation:

Capitalist economy has private ownership where utilization of resources takes place for private gains therefore in this kind of economy only those goods are produced which are in high demand in the market which is leads to open competition in the market where all the producer compete with each other to yield higher profits. 

Who determines what will be produced in a capitalist economy which is reflected by their spending pattern?

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

  1. Consumers

  2. Banks

  3. Government

  4. None of the above

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Correct Option: A
Explanation:

Capitalist economy has private ownership where utilization of resources takes place for private gains. Therefore in this kind of economy only those goods are produced which are in high demand in the market which is directly governed by the consumers.