Tag: economics

Questions Related to economics

When labour is relatively cheaper than capital, the producer will adopt ___________ technique of production.

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

  1. capital-intensive

  2. labour-intensive

  3. land-intensive

  4. either A or C

Show answer
Correct Option: B
Explanation:
The central problem of "How to produce?" which is faced by the economy where the economy consider either labour intensive techniques or capital intensive techniques for the production of goods and services in the economy depending upon the available resources in the economy. Therefore, a producer will go with the technique which is cheapest among all the techniques of the production.

Price mechanism has failed to function efficiently because _____________.

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

  1. perfect competition does not exist

  2. of creation of economic instability

  3. there is inequality in distribution of income and wealth

  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 and purchase by the demand sector. Therefore for price mechanism to operate freely, the market should be perfectly competitive without any intervention with stability in the demand and supply situation that depends upon the distribution of income and wealth in the economy.

Free operating of price mechanism has led to the evils of monopoly power in the hands of the __________.

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. producers

  3. government

  4. society

Show answer
Correct Option: B
Explanation:

In Price mechanism 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 purchase by the demand sector i.e demand will increase if price decreases and vice-versa. But producer sector is in high dominance compared to the consumer sector as they had to supply the goods to the market so they fraudulently affect the price of the goods by their operations. 

Price mechanism tends to create economic stability.

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 purchase by the demand sector i.e demand will increase if price decreases and vice-versa. So due to this freedom policy, there are many fraudulent practices that take place in the market which makes the economy very unstable. 

Free operation of price mechanism leads to inequalities in the distribution of income and wealth.

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

Show answer
Correct Option: A
Explanation:

Producers produce goods and service for them who have large money power. Thus, the price mechanism cannot ensure social justice rather it widens inequality in the distribution of income and wealth the rich get richer and the poor poorer. 

Price solves the problem of what to produce and in what quantities. There are unlimited wants but there is a scarcity of productive resources. If the price is high the producers will be willing to supply more but the consumers will be buying less and vice versa.

The correct answer is A.

Under price mechanism, the inequalities of wealth grows over time because of the _____________.

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

  1. meritorious claim to social wealth

  2. right to inheritance

  3. both A & B

  4. neither A nor B

Show answer
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. This leads to distribution of goods and services according to the purchasing power of the individuals which brings inequality in the distribution channel which is inherited by generation to generations. 

Price mechanism still operates freely, without government intervention, in certain capitalist economies.

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:

Capitalist economies has private ownership where utilization of resources takes place for private gains, therefore here price mechanism takes place very smoothly without any government intervention in all types of private business that operates in a capitalist economy. 

What are reasons due to which private producers do not take up production of public utilities?

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  1. It requires huge investment.

  2. Returns from sale of utilities is very low.

  3. There is no market price, since, utilities are collectively consumed.

  4. All of the above.

Show answer
Correct Option: D
Explanation:

Since the population is so huge that if any single private producer will come with a public utility product, it will require huge investment to satisfy all wants. Moreover, compared to other business the returns are very less in such kind of business as market price cannot be measured due to very widespread of distribution and consumption. 

According to the World Development Report 2006, brought out by the World Bank, countries with per capita income of Rs. 4,53,000 p.a. and above are called __________________.

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

  1. Weak countries

  2. Rich countries

  3. Low income countries

  4. All of them

Show answer
Correct Option: B
Explanation:

According to the report, the countries with per capita income of Rs. 37000 or less are called Low-income countries.


Hence, the correct option is $\text{B}$

Which of the following is a feature of market mechanism system in methods of allotting resource?

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

  1. All economic decisions are taken by Government.

  2. Ownership of resources of production is either private or individual.

  3. Equal and fair distribution of income.

  4. Gap between the rich and the poor is removed.

Show answer
Correct Option: A
Explanation:

In market mechanism, the government audits the overall output of the economy in order to ensure availability and efficient utilization of all the scarce resources in the economy.